Estimating Firm-Level Effective Tax Rates and the User Cost of Capital in New Zealand

Victoria University of Wellington Working Paper in Public Finance No. 12/2013

50 Pages Posted: 8 Jan 2014

See all articles by Richard Fabling

Richard Fabling

Motu Economic and Public Policy Research Trust

Norman Gemmell

Victoria University of Wellington - Victoria Business School

Richard Kneller

University of Nottingham

Lynda Sanderson

Government of New Zealand - Treasury

Date Written: June 30, 2013

Abstract

Effective marginal tax rates can be very different from the statutory rate and vary across firms, reflecting such factors as the extent and nature of taxable deductions (losses, depreciation), asset and ownership structures, and debt/equity financing. We estimate firm-specific EMTRs and related user cost of capital (UCC) measures allowing for shareholder-level taxation using data for 2000-2010 from the Longitudinal Business Database. Examining distributions of various UCC measures we find substantial firm-level heterogeneity; systematic changes as a result of tax reforms between 2004 and 2011; and systematic differences between foreign-owned and domestically-owned firms. Choices among alternative UCC measures make a difference to interpretations.

Suggested Citation

Fabling, Richard Blaikie and Gemmell, Norman and Kneller, Richard and Sanderson, Lynda, Estimating Firm-Level Effective Tax Rates and the User Cost of Capital in New Zealand (June 30, 2013). Victoria University of Wellington Working Paper in Public Finance No. 12/2013. Available at SSRN: https://ssrn.com/abstract=2375936 or http://dx.doi.org/10.2139/ssrn.2375936

Richard Blaikie Fabling

Motu Economic and Public Policy Research Trust ( email )

Level 1, 93 Cuba Street
P.O. Box 24390
Wellington, 6142
New Zealand

Norman Gemmell (Contact Author)

Victoria University of Wellington - Victoria Business School ( email )

PO Box 600
Wellington 6140
New Zealand

Richard Kneller

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

Lynda Sanderson

Government of New Zealand - Treasury ( email )

No. 1, The Terrace
Wellington, 6011
New Zealand

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