The Taxation of Income from Capital

King, Mervyn; Fullerton, Don

doi:10.7208/chicago/9780226436319.001.0001

Cited by 451 publications

(179 citation statements)

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“…For example, the well-known expressions used by King and Fullerton (1984) imply financial cash flows which are difficult to justify by modelling a simple one period investment. The approach here is implicitly that of setting financial constraints -in particular, non-negativity constraints on dividend payments, new equity issues and debt issues.…”

Section: Eatrmentioning

confidence: 99%

“…This builds on the standard approach to measuring the effective marginal tax rate (EMTR). This approach developed, for example, by Auerbach (1979) and King and Fullerton (1984), and at the international level by Alworth (1988), Keen (1991) and OECD (1991), considers the net present value of the income stream from an investment and the net present value of the cost of the investment. 4 Setting these equal defines the marginal investment and the required pre-tax rate of return can be derived.…”

Section: Introductionmentioning

confidence: 99%

“…It also provides a useful tool for policy makers to analyse the impact of the tax system in isolation from other economic factors. However, although 3 Notably King and Fullerton (1984), Alworth (1988), OECD (1991) and Keen (1991). 6 quite complex elements of the tax system can be analysed, several assumptions about the structure and financing of the investment must be made. A number of important real world features, such as the tax planning activities of multinational firms, cannot be dealt with completely.…”

Section: Introductionmentioning

confidence: 99%

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The taxation of discrete investment choices

Devereux

Griffith

1998

Working Paper Series

218

155

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Traditional analysis of the taxation of income from capital has focused on the impact of tax on marginal investment decisions; the principal impact of tax on investment is through the cost of capital, and is generally measured by an effective marginal tax rate. In this paper, we consider cases in which investors face a choice between two or more mutually exclusive projects, both of which are expected to earn at least the minimum required rate of return. Examples include the location decisions of multinationals, firms' choice of technology, and the choice of investment projects in the presence of binding financial constraints. In these cases the choice depends on the effective average tax rate. We propose a measure of this rate and demonstrate its relationship to the conventional effective marginal tax rate. Estimates of both are presented and compared for domestic and international investment in Germany, Japan, the UK and USA between 1979 and 1997.

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Section: Eatrmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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The taxation of discrete investment choices

Devereux

Griffith

1998

Working Paper Series

218

155

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“…But there "is not need to restrict the sum" of deductions "to unity," according to King and Fullerton (1984), p. 19, who observe that at "certain times it exceeds unity (for example, when accelerated depreciation does not reduce the base for standard depreciation allowances)." In the present paper, a and c are considered as separate, exogenous variables, so that an increase in a is analyzed as if c is kept constant, and vice versa.…”

Section: Notesmentioning

confidence: 99%

An Analytical Model of Required Returns to Equity under Taxation with Imperfect Loss Offset

Lund

2003

SSRN Journal

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“…238, 250, 257 f, for evidence of payroll formula distortion. 32 ETRs were first introduced by King and Fullerton (1984). 33 See European Commission (2001 and.…”

Section: Effective Tax Ratesmentioning

confidence: 99%

Can formula apportionment really prevent multinational enterprises from profit shifting? The role of asset valuation, intragroup debt, and leases

2018

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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. Abstract The European Commission has been supporting a transition from a system of separate accounting to a system of formula apportionment. In 2011, it presented a proposal for a council directive on a Common Consolidated Corporate Tax Base (CCCTB). Formula apportionment is often considered more resistant to profit shifting and assumed to reduce compliance costs. We use a dynamic model of tax accounting based on neoclassical investment theory and effective tax rates to determine whether, and to what extent, formula apportionment mitigates the efficiency of typical profit-shifting measures. We focus on the roles of transfer pricing and intragroup debt financing (through loans and leases) under both separate accounting and formula apportionment. Our results show that instead of eliminating tax planning strategies, the proposed system will simply induce a shift from manipulating reported profits to influencing the apportionment key. Inside the European Union, the CCCTB may be able to render thin capitalisation rules and transfer pricing documentation redundant. However, formula apportionment invites new forms of tax planning involving manipulating the book value of assets rather than profit shifting. Terms of use: Documents in

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The Taxation of Income from Capital

Cited by 451 publications

References 0 publications

The taxation of discrete investment choices

The taxation of discrete investment choices

An Analytical Model of Required Returns to Equity under Taxation with Imperfect Loss Offset

Can formula apportionment really prevent multinational enterprises from profit shifting? The role of asset valuation, intragroup debt, and leases

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