The Dynamic Economic Effects of a U.S. Corporate Income Tax Rate Reduction

Diamond, John W.; Neubig, Thomas S.

doi:10.7551/mitpress/9780262028301.003.0008

Cited by 6 publications

(5 citation statements)

References 41 publications

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“…Indeed, leaner depreciation will immediately make investment more expensive, while a lower CIT rate only partly offsets this effect. Simulation models for Europe and the US indeed find that scrapping depreciation allowances in exchange for CIT rate reduction in a revenue-neutral fashion will generally deter investment (Bettendorf et al, 2010;Diamond et al, 2014). Note also that the scope for base broadening through leaner depreciation allowances in Japan is limited.…”

Section: Leaner Depreciation Allowancesmentioning

confidence: 96%

Japan's Corporate Income Tax: Facts, Issues and Reform Options

Mooij

Saito

2014

SSRN Journal

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Section: Leaner Depreciation Allowancesmentioning

confidence: 96%

Japan's Corporate Income Tax: Facts, Issues and Reform Options

Mooij

Saito

2014

SSRN Journal

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“…10 While Bhattarai and others (2017) finance the tax reform with budget deficits (though no further details are provided), Benzell, Kotlikoff and LaGarda (2017) consider the replacement of a tax on capital returns (dubbed a "corporate income tax") by a combination of a consumption tax plus a labor subsidy (to proxy a DBCFT, see below for more). Diamond and al. (2014) provide significantly lower output estimates from a reduction in CITs which is financed by the reduction of investment tax incentives such as investment tax credit or accelerated depreciation allowances.…”

Section: Cit Reforms In General Equilibrium Models: a Review Of Tmentioning

confidence: 99%

Corporate Tax Reform

Carton¹,

Corugedo²,

Hunt³

2019

IMF Working Papers

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This paper uses a multi-region, forward-looking, DSGE model to estimate the macroeconomic impact of a tax reform that replaces a corporate income tax (CIT) with a destination-based cash-flow tax (DBCFT). Two key channels are at play. The first channel is the shift from an income tax to a cash-flow tax. This channel induces the corporate sector to invest more, boosting long-run potential output, GDP and consumption, but crowding out consumption in the short run as households save to build up the capital stock. The second channel is the shift from a taxable base that comprises domestic and foreign revenues, to one where only domestic revenues enter. This leads to an appreciation of the currency to offset the competitiveness boost afforded by the tax and maintain domestic investment-saving equilibrium. The paper demonstrates that spillover effects from the tax reform are positive in the long run as other countries' exports benefit from additional investment in the country undertaking the reform and other countries' domestic demand benefits from improved terms of trade. The paper also shows that there are substantial benefits when all countries undertake the reform. Finally, the paper demonstrates that in the presence of financial frictions, corporate debt declines under the tax reform as firms are no longer able to deduct interest expenses from their profits. In this case, the tax shifting results in an increase in the corporate risk premia, a near-term decline in output, and a smaller long-run increase in GDP.

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“…Gazette 17A/2013) which provides for a six percent (6%) increase in the corporate tax rate. This policy option was not expected 5 and is in stark contrast to the positions announced by the parties in power 6 , the official positions of the associations of the largest productive classes 7 (ACCI,SEV, GSEVEE) as well as the prevailing modern theoretical and empirical approaches that a reduction of the tax cost is more desirable by businesses (Neubig 2006) and would have an immediate positive impact on growth, while over time it would increase revenue by broadening the tax base (Diamond et al, 2014). Moreover, the important Deferred Tax Asset Positions of banks 8 are of particular significance in view of their recapitalization because including DTA in regulatory capital reduces their need for additional funds.…”

Section: Introductionmentioning

confidence: 96%

Deferred Tax Positions under the Prism of Financial Crisis and the Effects of a Corporate Tax Reform

Chytis

Koumanakos

Goumas

2015

International Journal of Corporate Finance and Accounting

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Evangelos KoumanakosUniversity of Ioannina , Department of Economics, Ioannina , Greece, Costas Siriopoulos,University of Patras, Department of Business Administration, Patra, Greece, ABSTRACTThe effects of corporate tax reforms in reported profits and firms' financial position have been extensively studied in the literature. However, only few studies disaggregate deferred tax items to jointly explore political implications and aspects of corporate behavior around such reforms. Greece's recent financial crisis and economic recession provides an intriguing setting for examining possible incentives and consequences of substantial tax rate changes, such as the 6% increase imposed by the Greek Government early in year 2013. Results reveal a totally different picture between financial and nonfinancial firms, with the former being clearly favored, at least from this short-run effect. More specifically, Greek banks, given the very significant Deferred Tax Assets Positions arising from the "haircut" of Greek Government Bonds known as PSI, strengthen their assets and net income by 1.58 billion Euros, corresponding to more than ¼ of their total losses at the end of 2012, whereas industrial firms experience a significant increase in long-term liabilities and a decrease in net income of 193%. These findings seem to coincide with the view that tax policy design is usually shaped by taking into consideration powerful groups' interests, as it normally happens with banks especially in periods of fiscal instability.

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The Dynamic Economic Effects of a U.S. Corporate Income Tax Rate Reduction

Cited by 6 publications

References 41 publications

Japan's Corporate Income Tax: Facts, Issues and Reform Options

Japan's Corporate Income Tax: Facts, Issues and Reform Options

Corporate Tax Reform

Deferred Tax Positions under the Prism of Financial Crisis and the Effects of a Corporate Tax Reform

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