Measuring the effective tax burden in the real world

Polito, Vito 2009. Measuring the effective tax burden in the real world. Fiscal Studies 30 (2) , pp. 247-278. 10.1111/j.1475-5890.2009.00095.x

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Abstract

This paper argues that forward-looking indices of the effective tax burden on income from capital – namely, effective marginal and average tax rates – are negatively biased because traditional models overlook dividend constraints associated with financial tax incentives, such as accelerated depreciation. The paper presents measures of the two indices adjusted to remove the bias and compares the new indices with the traditional ones. Numerical simulations carried out to quantify the magnitude of the bias for France, Germany, Ireland, Italy and the UK give evidence of sizeable distortions in the unadjusted indices and, in turn, suggest significant mismeasurement in the current assessment of the effective tax burden.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HG Finance H Social Sciences > HJ Public Finance
Uncontrolled Keywords:	Capital theory ; Corporate taxation ; Investment incentives ; Dividend policy constraints
Publisher:	Wiley-Blackwell
ISSN:	0143-5671
Last Modified:	19 Mar 2016 22:32
URI:	https://orca.cardiff.ac.uk/id/eprint/19546

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