Does Taxation Stifle Corporate Investment? Firm-Level Evidence from ASEAN Countries

28 Pages Posted: 14 Mar 2018

See all articles by Serhan Cevik

Serhan Cevik

International Monetary Fund (IMF)

Fedor Miryugin

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2018

Abstract

This paper conducts a firm-level analysis of the effect of taxation on corporate investment patterns in member states of the Association of Southeast Asian Nations (ASEAN). Using large-scale panel data on nonfinancial firms over the period 1990-2014, and controlling for macro-structural differences among countries, we find a significant degree of persistence infirms' net fixed investments over time, which vary with firm characteristics, such as size, sales, profitability, leverage, and age. Our analysis brings up interesting empirical results, including nonlinear patterns of behavior in firms' capital investment decisions acrosss ASEAN countries. Concerning the main variable of interest, we find that a moderate level of taxation does not hinder business investment, but this effect turns negative as higher tax burden raises the user cost of capital and distorts resource allocations.

Keywords: Investment, Corporate income tax, leverage, firm performance

JEL Classification: E22, E51

Suggested Citation

Cevik, Serhan and Miryugin, Fedor, Does Taxation Stifle Corporate Investment? Firm-Level Evidence from ASEAN Countries (March 2018). IMF Working Paper No. 18/34, Available at SSRN: https://ssrn.com/abstract=3140332

Serhan Cevik (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Fedor Miryugin

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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