The Effect of Corporate Tax Cut on Capital Investment: An Empirical Study
0
조회
0
다운로드
0
인용
0
참고문헌
키워드
초록
From 2005 to 2006, Ghana reduced its corporate tax rate from 32.5 to 25 percent. The study uses both firm financial data as well as micro-economic data to examine how the cut in corporate tax rate affected firm capital investment in the country. The sampled consist of all non-financial firms on the Ghana Stock Exchange (GSE) between 2003 and 2017 with complete financial records. The result of the analysis shows a significant surge in firms’ capital investment in the periods after the tax rate reduction. In a sensitivity test, we also found an inverse relationship between firm-level tax rate and capital investment. The findings support the argument that a reduction in corporate tax rate could be used to promote investment for economic growth. The empirical evidence should, therefore, serve as a guide to policymakers in formulating tax policies that seek to stimulate firm growth. To the best of our knowledge, this is the first study that employed both financial and microeconomic data to examine the effect of Ghana's tax cut in 2005/2006 on corporate capital investment. It is also one of the few papers that examines the practical implication of tax reform from the respective of a developing country.
Abstract
From 2005 to 2006, Ghana reduced its corporate tax rate from 32.5 to 25 percent. The study uses both firm financial data as well as micro-economic data to examine how the cut in corporate tax rate affected firm capital investment in the country. The sampled consist of all non-financial firms on the Ghana Stock Exchange (GSE) between 2003 and 2017 with complete financial records. The result of the analysis shows a significant surge in firms’ capital investment in the periods after the tax rate reduction. In a sensitivity test, we also found an inverse relationship between firm-level tax rate and capital investment. The findings support the argument that a reduction in corporate tax rate could be used to promote investment for economic growth. The empirical evidence should, therefore, serve as a guide to policymakers in formulating tax policies that seek to stimulate firm growth. To the best of our knowledge, this is the first study that employed both financial and microeconomic data to examine the effect of Ghana's tax cut in 2005/2006 on corporate capital investment. It is also one of the few papers that examines the practical implication of tax reform from the respective of a developing country.
참고문헌 (29)
- "Businesses Like Investment Tax Breaks, But will They Spend? Reuters Business News" (2017)[URL]
- Ahiabor, G., "The Effects of Corporate Taxes on the Level of Investment in Ghana", Developing Country Studies, 3, pp.57~66 (2013)
- Ahn, S., "Leverage and Investment in Diversified Firms", Journal of Financial Economics, 79, pp.317~337 (2006)
- Corporations in Sweden: The Effects of the 2006 Tax Reform on Investments, Job Creation and Business Start-ups, "Alstadsæter, A.", Swedish Ministry of Finance, ~ (2014)
- Auerbach, A., "Taxation, Corporation Financial Policy and the Cost of Capital", Journal of Economic Literature, 21(30), pp.905~940 (1983)
- Baber, W., "Investment Opportunities and the Structure of Executive Compensation", Journal of Accounting and Economics, 21, pp.297~318 (1996)
- Do Corporate Tax Cuts Increase Investments?, "Brandstetter, L.", FAccT Center, ~, pp.FAccT Center Working Paper No. 14 (2013), 2013
- Tax Effects on Work Activity, Industry Mix and Shadow Economy Size: Evidence from Rich-Country Comparisons, "Davis, S. J.", National Bureau of Economic Research. Inc, ~, pp.NBER working papers 10509 (2004)
- Devereux, M., "Evaluating Tax Policy for Location Decisions", International Tax and Public Finance, 10, pp.107~126 (2003)
- Djankov, S., "The Effect of Corporate Taxes on Investment and Entrepreneurship", American Economic Journal: Macroeconomics, American Economic Association, 2(3), pp.31~64 (2010)
- Dobbins, L., "Do Corporate Tax Cuts Increase Investments?", Accounting and Business Research, 46(7), pp.731~759 (2016)
- Edame, G. E., "The Impact of Taxation on Investment and Economic Development in Nigeria", Academic Journal of Interdisciplinary Studies, 3(4), pp.209~218 (2014)
- Fazzari, S, "Investment, Financing Decisions, and Tax Policy", American Economic Review, 78, pp.200~205 (1988)
- Federici, D, "Do Corporate Taxes Reduce Investments? Evidence from Italian Firm-level Panel Data", Cogent Economics and Finance, 3, pp.1~14 (2015)
- Goolsbee, A., "Investment Tax Incentives, Prices, and the Supply of Capital Goods", The Quarterly Journal of Economics, 113, pp.121~148 (1998)
- Gordon, R. H., "Policy Alternatives for the Investment Tax Credit", Joint Seminar, Encouraging Capital Formation through the Tart Code, U.S. Senate Budget Committee, 15~84 (1975)
- Hall, R. E., "Tax Policy and Investment Behavior", an Economic Review, 57, pp.391~414 (1967)
- Hsieh, C. H., "Taxes and Growth in a Financially Underdeveloped Country: Evidence from the Chilean Investment Boom", Economia: Journal of the Latin American and Caribbean Economic Association, 8(1), pp.1~40 (2007)
- Taxes and the Economy: An Economic Analysis of the Top Tax Rate Since 1945, "Hungerford, T. L.", Congressional Research Servic, ~ (2012)
- Jensen, M. C., "Agency Costs of Free Cash Flow, Corporate Finance, and Takeover", American Economic Review, 76, pp.323~329 (1986)
- Khan, M. S., "Private Investment and Economic Growth in Developing Countries", World Development, 18(1), pp.19~27 (1990), Elsevier
- Medina, J. P., "Cash Flow and Investment Decisions in Chile: Evidence of Open Stock Companies", Spanish Journal of Economics and Finance, 35, pp.301~323 (1998)
- "Economic Growth and the Role of Taxation. Report prepared for the OECD" (2007)[URL]
- "Corporate Income Tax Rates around the World 2017" (2017)[URL]
- "Corporate Tax Reform (2010-2016)" (2016)[URL]
- Summers, L. H., "Taxation and Corporate Investment: A q-theory Approach", Brookings Papers on Economic Review, 12(1), pp.67~140 (1981), Economic Studies Program, The Brookings Institute
- Vergara, R., "Taxation and Private Investment: Evidence from Chile", Applied Economics, 42(6), pp.717~725 (2007)