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Type: Journal Articles Authors: Vito Polito ISSN: Print 0143-5671 Online: 1475-5890
Published in: Fiscal Studies, Vol. 30, No. 2, June 2009
Volume, issue, pages: Vol. 30, No. 2, pp. 247 - 278
JEL classification: H25, H32 Keywords: capital theory, corporate taxation, investment incentives, dividend policy constraints
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. Search |
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