The Finnish Corporate Income Tax Reform and the Financial Strategy of Firms: A General Equilibrium Approach
Tóm tắt
This paper simulates the effects of the recent Finnish corporate tax reform with a computable general equilibrium model. It shows that the impact of the reform on the capital stock depends on the reactions of firms. If the financial strategy is changed to prefer dividend distribution and share issues, the cost of capital falls and the capital stock increases. On the other hand, if the criterion of financial policy is to minimise the welfare loss of current shareholders, the earlier financial behaviour should be continued. In that case,the induced higher cost of capital leads to a lower capital stock. The overall welfare evaluation of the tax reform is not sensitive to the regime shift: the reform should not have been implemented. This is because the increase in interest income taxation distorts saving decisions, expands the net foreign debt of the economy and weakens the terms of trade.
Tài liệu tham khảo
Armington, P. S. (1969) 'The Theory of Demand for Products Distinguished by Place of Production', IMF Staff Papers 16, 159–176.
Auerbach, A. J. and Kotlikoff, L. J. (1987) Dynamic Fiscal Policy. Cambridge: Cambridge University Press.
Bovenberg, A. L. (1989) 'The Integration of Micro and Macro Relations in Dynamic Policy Models: The Case of Saving and Investment Behavior', in Public Finance and Steady Economic Growth. Proceedings of the 45th Congress of the International Institute of Public Finance.
Broer, D. P. and Westerhout, E. W. M. T. (1993) 'Taxation in an Intertemporal General Equilibrium Model of a Small Open Economy', Economic Modelling 10, 64–80.
Fehr, H. (1998) Welfare Effects of Dynamic Tax Reforms. Beiträge zur Finanzwissenschaft; Bd. 5. Tübingen: Mohr Siebec.
Fullerton, D. and Henderson, Y. K. (1986) 'The Impact of Fundamental Tax Reform on the Allocation Resources', NBER Working Paper No. 1904.
Fullerton, D. and Mackie, J. M. (1989) 'Economic Efficiency in Recent Tax Reform History: Policy Reversals or Consistent Improvements?', National Tax Journal 42, 1–13.
Goulder, L. H. and Summers, L. H. (1989) 'Tax Policy, Asset Prices and Growth: A General Equilibrium Analysis', Journal of Public Economics 38, 265–296.
Goulder, L. H. and Thalmann, P. (1990) 'Approaches to Efficient Capital Taxation: Leveling the Playing Field vs. Living by the Golden Rule', NBER Working Paper No. 3559.
Head, J. G. (1997) 'Company Tax Structure and Company Tax Incidence', International Tax and Public Finance 1, 61–100.
Heinonen, A. and Ylä-Liedenpohja, J. (1992) 'General Equilibrium Calculations on a Tax Reform under International Capital Flows', Liiketaloudellinen Aikakauskirja 2, 3–12.
Hutton, J. P. and Kenc, T. (1998) 'The Influence of Firm's Financial Policy on Tax Reform', Oxford Economic Papers 50, 663–684.
Kanniainen, V. (1991) Yhtiöveron hyvitysjärjestelmään siirtyminen Suomessa, ETLA. B 73, Helsinki.
Kanniainen, V. and Hernesniemi, H. (1994) 'The Effects of the 1993 Finnish Tax Reform on the Stock Prices in the Helsinki Stock Exchange', (in Finnish), Liiketaloudellinen aikakauskirja 1, 69–81.
Lassila, J. and Valkonen, T. (1995) 'Policy Credibility in Numerical Overlapping Generations Models'. Paper presented at the 51st Congress of International Institute of Public Finance, Lisbon, August 21–24.
Myers, S. C. and Majluf, N.S. (1984) 'Corporate Financing and Investment Decisions when Firms have Information that Investors do not have', Journal of Financial Economics 13, 187–221.
Myhrman, R., Kröger, O., Rauhanen, T., Junka, T., Kari, S., and Koskenkylä, H. (1995) Finnish Corporate Tax Reforms. VATT-Publications No 20. Helsinki: Government Institute for Economic Research.
Nielsen, S. B. and Sørensen, P. B. (1991) 'Capital Income Taxation in a Growing Open Economy', European Economic Review 14, 179–197.
Sinn, H-W. (1987) Capital Income Taxation and Resource Allocation. Amsterdam:North Holland.
Sinn, H-W. (1990) 'Taxation and the Cost of Capital: the “Old” View, the “New” View, and Another View', NBER Working Paper No. 3501.
Sørensen, P. B. (1994) 'Some Old and New Issues in the Theory of Corporate Income Taxation', Economic Studies No 2/1994. Economic Policy Research Unit, Copenhagen Business School.
Tähtinen, T. (1992) 'Uudistumassa oleva pääomatulojen verotus muuttaa huomattavasti yrityksen rahoituskustannuksia ja investointien tuottovaatimuksia', Bank of Finland Discussion Papers 33/92.
Turnovsky, S. J. (1990) 'The Effects of Taxes and Dividend Policy on Capital Accumulation and Macroeconomic Behavior', Journal of Economic Dynamics and Control 14, 491–521.
Valkonen, T. (1999) The Finnish Corporate and Capital Income Tax Reform: A General Equilibrium Approach, ETLA, A 29, Helsinki.
Whalley, J. (1985) 'Hidden Challenges in Recent Applied General Equilibrium Exercises', in J. Piggot and Whalley, J., eds, New Developments in Applied General Equilibrium Analysis. Cambridge: Cambridge University Press.
Ylä-Liedenpohja, J. (1988) 'Laskelmia korkojen verotuskohtelun muuttamisesta', Liiketaloudellinen Aikakauskirja 2, 65–95.
Zodrow, G. E. (1991) 'On the “Traditional” and “New” Views of Dividend Taxation', National Tax Journal 44, 497–509.