Download DGK tax data description - NYU Stern School of Business

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.