Statutory tax rates - NYU



Description of tax data

This note describes the data contained in the document “tablesIFS.xls”. These data are an updated version of the data used in the following paper:

Devereux, M.P., R. Griffith and A. Klemm (2002) “Corporate income tax reforms and international tax competition” Economic Policy, 35, 451-495.

After publication they were updated to 2005 and in places corrected for mistakes.

The definitions of the effective tax rates are described in:

Devereux, M.P. and R. Griffith (2003) “Evaluating tax policy for location decisions” International Tax and Public Finance,10, 107-126.

Other useful references are:

Chennells, L. and R. Griffith (1987) Taxing Profits in a Changing World, IFS: London

OECD (1991) Taxing Profits in a Global Economy, OECD: Paris.

Data covered

The data shown are the statutory tax rate (inclusive of local taxes), the present discounted value of depreciation allowances and effective marginal tax rates (EMTR) and average tax rates (EATR) under a number of different assumptions.

Assumptions

In order to calculate effective tax rates a number of assumptions need to be made. We define a base case that makes the following assumptions:

- the investment is in plant and machinery, financed by equity or retained earnings

- the economic depreciation rates for plant and machinery is 12.25%

- there is a common fixed inflation rate of 3.5%

- the real interest rate is 10%

- for the EATR, the expected rate of economic profits earned is 10% (implying a financial return, p, of 20%).

- only corporate taxes; no personal taxes

Variations on this base case are also available, as set out below. Unless specified, the base case assumptions are used.

Overview of tables

The Excel file contains 15 worksheets, labelled A1 to A15. They contain the following data:

A1: Statutory tax rate (including local taxes)

A2: Depreciation allowances, base case

A3: Depreciation allowances, investment in industrial buildings instead of plant and machinery

A4: Depreciation allowances, time and country specific inflation rates instead of a fixed rate

A5: EMTR, base case

A6: EMTR, financed by debt instead of equity

A7: EMTR, investment in industrial buildings instead of plant and machinery (assuming an economic depreciation rate of 3.61%)

A8: EMTR, country and time specific inflation instead of fixed inflation

A9: EATR, base case

A10: EATR, financed by debt instead of equity

A11: EATR, investment in industrial buildings instead of plant and machinery (assuming an economic depreciation rate of 3.61%)

A12: EATR, country and time specific inflation instead of fixed inflation

A13: EATR, 20% rent instead of 10%

A14: EATR, 30% rent instead of 10%

A15: EATR, 40% rent instead of 10%

Data sources

The main sources for information about statutory tax rates, depreciation allowances, and the structure of the tax systems were the Price Waterhouse Doing Business in … guides and the Price Waterhouse Corporation Tax Summary. Some information was also taken from the KPMG Tax Notes , the International Bureau for Fiscal Documentation (IBFD) AnnualReport, OECD (1991 — Taxing Profits in a Global

Economy) and various other publications dealing with specific countries. The information on inflation was taken from the IMF World Economic Database.

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