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Effective Average Tax Rates for Permanent Investment
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Author/Editor: |
Klemm, Alexander |
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March 1, 2008 |
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Electronic Access: |
Free Full Text (PDF file size is 305KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
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Summary: This paper extends the effective average tax rate (EATR) developed in Devereux and Griffith (2003) by relaxing the assumption of a one-period perturbation in the capital stock. Instead it allows a permanent investment. While this may appear a small change, it has important implications. First, it allows the EATR to be calculated in the presence of tax holidays, which are an important part of tax systems, especially in developing countries. Second, it reveals an interesting feature of the original EATR: despite the assumption of a one-period investment, the original measure is informative about long-term investments, thanks to the assumption of pooled depreciation. Without this assumption-which is justifiable in a few countries only- the EATR based on one-period perturbation in the capital stock would be less useful for analyzing medium and long-term investments.
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Order a print copy
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Series: |
Working Paper No. 08/56 |
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Subject(s): |
Investment | Tax rates |
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Author's keyword(s): |
effective tax rates
| discrete investment
| tax holidays.
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Published: |
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March 1, 2008 |
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Format: |
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Paper |
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Stock No: |
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WPIEA2008056 |
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Pages: |
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16 |
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Price: |
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US$18.00 (Academic Rate: US$18.00 )
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