The impact of tax structure on investment: an empirical assessment for OECD countries

Alves, José

doi:10.3326/pse.43.3.4.

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The impact of tax structure on investment: an empirical assessment for OECD countries*

José Alves*

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https://doi.org/10.3326/pse.43.3.4

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Table 1
Summary statistics of the variables set for investment regressions, 1980-2015

	realgdppc	taxinc	taxfirms	ssc	taxpayroll	taxprop
Mean	24.448	8.82	2.806	8.345	0.369	1.745
Std. dev.	14.313	4.635	1.500	4.981	0.728	1.003
Max	101.054	26.78	12.594	19.173	5.661	7.334
Min	2.184	0.873	0.261	0.000	0.000	0.074
Obs.	1195	1106	1106	1137	1137	1137
	taxvat	gfcf	gfcfgr	depositrate	ageratio	debt
Mean	10.588	23.161	3.314	9.253	51.287	55.728
Std. dev.	3.046	4.091	8.917	25.364	6.931	35.901
Max	18.73	39.404	45.119	682.53	96.457	242.113
Min	2.979	11.546	-47.761	-0.18	36.323	3.664
Obs.	1137	1174	1164	1055	1260	943
	foreigninvestment	rtfpna	totexp	pop	hconsggdp	outputgap
Mean	3.645	0.941	42.621	33.531	56.382	-0.319
Std. dev.	10.487	0.123	9.657	52.235	7.069	2.850
Max	252.308	1.539	68.436	319.449	79.551	14.911
Min	-58.323	0.472	14.244	0.228	29.918	-11.437
Obs.	1120	1173	977	1173	1174	851

Table 2
Linear and non-linear short-run impact results of taxation structure on investment decisions

	OLS		OLS-FE		GMM		RLS
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Δrealgdppc	0.004***	0.003***	0.003***	0.003***	0.004***	0.005***	0.004***	0.004***
	(0.000)	(0.000)	(0.001)	(0.001)	(0.001)	(0.001)	(0.000)	(0.000)
taxinc_-1	-0.144**	-0.069	0.131	1.491**	-0.127	0.037	-0.128**	-0.182
	(0.070)	(0.215)	(0.199)	(0.577)	(0.112)	(0.367)	(0.061)	(0.175)
taxinc²_-1		-0.007		-0.070**		-0.015		-0.001
		(0.009)		(0.031)		(0.017)		(0.008)
taxfirms_-1	-0.442**	-1.580***	0.277	-0.595	-0.561***	-3.859***	-0.289**	-1.032**
	(0.176)	(0.568)	(0.272)	(0.779)	(0.263)	(1.488)	(0.140)	(0.427)
taxfirms²_-1		0.107**		0.070		0.279**		0.066*
		(0.044)		(0.060)		(0.115)		(0.039)
ssc_-1	-0.121**	-0.436**	-0.047	-2.007**	-0.151	-0.703	-0.086*	-0.276
	(0.058)	(0.209)	(0.230)	(1.013)	(0.095)	(0.437)	(0.050)	(0.180)
ssc²_-1		0.017		0.083**		0.028		0.010
		(0.011)		(0.039)		(0.021)		(0.010)
taxpayroll_-1	-0.324	0.420	1.990**	3.002	-0.065	-2.013	-0.284	0.107
	(0.262)	(0.929)	(0.968)	(1.904)	(0.381)	(1.546)	(0.277)	(0.934)
taxpayroll²_-1		-0.365		-0.304		0.729		-0.144
		(0.356)		(0.540)		(0.682)		(0.383)
taxprop_-1	-0.571*	-0.588	-0.211	0.775	-0.036	3.822	-0.013	1.139
	(0.295)	(1.025)	(0.508)	(1.521)	(0.649)	(2.793)	(0.255)	(0.770)
taxprop²_-1		0.042		-0.118		-0.658		-0.208
		(0.166)		(0.214)		(0.443)		(0.141)
taxvat_-1	-0.612***	-2.640***	0.413	0.291	-0.103	-2.691*	-0.663***	-1.982***
	(0.163)	(0.635)	(0.363)	(1.127)	(0.3)	(1.519)	(0.133)	(0.538)
taxvat²_-1		0.099***		0.016		0.111		0.066**
		(0.033)		(0.057)		(0.072)		(0.026)
gfcf_-1	-0.521***	-0.615***	-1.283***	-1.337***	-0.077	-0.340	-0.505***	-0.599***
	(0.104)	(0.123)	(0.148)	(0.159)	(0.111)	(0.208)	(0.072)	(0.079)
gfcfgr_-1	0.242***	0.242***	0.225***	0.221***	0.429**	0.267	0.259***	0.257***
	(0.057)	(0.058)	(0.061)	(0.061)	(0.183)	(0.169)	(0.032)	(0.032)
Δdepositrate	-0.426*	-0.435*	-0.436*	-0.414*	1.063	-1.323	-0.583***	-0.606***
	(0.241)	(0.238)	(0.256)	(0.251)	(1.233)	(1.526)	(0.160)	(0.159)
ageratio_-1	-0.016	-0.053	-0.065	-0.029	-0.044	-0.029	-0.027	-0.058
	(0.067)	(0.071)	(0.137)	(0.144)	(0.116)	(0.104)	(0.053)	(0.055)
Δdebt	-0.275***	-0.303***	-0.189**	-0.200**	-0.487*	-0.543**	-0.264***	-0.295***
	(0.078)	(0.082)	(0.082)	(0.084)	(0.258)	(0.218)	(0.047)	(0.047)
rtfpna	-12.705***	-12.809***	-6.562	-2.947	2.829	-0.873	-10.328***	-10.345***
	(3.769)	(3.884)	(5.536)	(6.308)	(4.246)	(5.567)	(2.677)	(2.770)
Δtotexp_-1	-0.148	-0.160	-0.088	-0.081	0.315	-0.139	0.053	0.032
	(0.159)	(0.163)	(0.154)	(0.157)	(0.654)	(0.602)	(0.104)	(0.104)
log(pop)	-0.497	-0.580	61.785***	63.702***	0.228	-0.501	-0.926***	-0.997***
	(0.397)	(0.396)	(10.841)	(11.771)	(0.878)	(0.974)	(0.237)	(0.243)
foreigninvestment_-1	-0.075***	-0.066***	-0.070***	-0.066***	0.028	0.009	-0.075***	-0.073***
	(0.017)	(0.016)	(0.017)	(0.017)	(0.087)	(0.091)	(0.015)	(0.015)
hconsumption_-1	0.039	0.013	-0.214**	-0.242**	0.07	0.000	0.036	0.024
	(0.027)	(0.028)	(0.093)	(0.094)	(0.048)	(0.049)	(0.027)	(0.028)
outputgap	0.369**	0.466***	0.690***	0.736***	-0.849**	0.121	0.271***	0.352***
	(0.157)	(0.157)	(0.159)	(0.170)	(0.395)	(0.565)	(0.091)	(0.093)
*Tax thresholds*
taxinc	-	-	-	10.65%	-	-	-	-
taxfirms	-	7.38%	-	-	-	6.92%	-	7.82%
ssc	-	-	-	12.09%	-	-	-	-
taxpayroll	-	-	-	-	-	-	-	-
taxprop	-	-	-	-	-	-	-	-
taxvat	-	13.33%	-	-	-	-	-	15.02%
R²	0.540	0.554	0.680	0.687	0.343	0.477	0.401	0.414
DW-Stat	1.856	1.875	2.000	2.018	2.110	1.949	n.a.	n.a.
Obs.	529	529	529	529	473	473	529	529

Notes: *, ** and *** represent statistical significance at levels of 10%, 5%, and 1% respectively. The robust standard errors are in brackets. The White diagonal covariance matrix is used in order to assume residual heteroskedasticity, with the exception of the RLS technique. The DW-statistic is the Durbin-Watson statistic. The non-bold and bold values express, respectively, maximum and minimum levels of optimal tax items.

Table 3
Linear and non-linear long-run impact results of taxation structure on investment decisions

	OLS		OLS-FE		GMM		RLS
	(9)	(10)	(11)	(12)	(13)	(14)	(15)	(16)
Δrealgdppc	0.000**	0.000**	0.003***	0.001**	0.004***	0.001**	0.004***	0.000*
	(0.000)	(0.000)	(0.001)	(0.000)	(0.001)	(0.000)	(0.000)	(0.000)
taxinc_-1	-0.042	-0.085	0.131	0.740	-0.127	-0.263	-0.128**	0.021
	(0.051)	(0.091)	(0.199)	(0.571)	(0.112)	(0.169)	(0.061)	(0.114)
taxinc²_-1		0.003		-0.042		0.012*		-0.004
		(0.004)		(0.029)		(0.007)		(0.005)
taxfirms_-1	-0.098	-0.197	0.277	0.489	-0.561**	-0.601	-0.289**	-0.828***
	(0.107)	(0.458)	(0.272)	(0.747)	(0.263)	(0.734)	(0.140)	(0.278)
taxfirms²_-1		0.014		-0.028		0.041		0.066***
		(0.034)		(0.053)		(0.055)		(0.025)
ssc_-1	-0.069**	-0.227**	-0.047	-0.417	-0.151	-0.150	-0.086*	-0.255**
	(0.034)	(0.091)	(0.230)	(0.662)	(0.095)	(0.172)	(0.050)	(0.117)
ssc²_-1		0.010*		0.008		0.006		0.009
		(0.005)		(0.023)		(0.010)		(0.006)
taxpayroll_-1	-0.168	0.170	1.990**	1.156	-0.065	0.221	-0.284	-0.164
	(0.160)	(0.490)	(0.968)	(1.352)	(0.381)	(0.986)	(0.277)	(0.608)
taxpayroll²_-1		-0.215		-0.467		-0.334		-0.044
		(0.185)		(0.503)		(0.415)		(0.249)
taxprop_-1	-0.258	-0.971	-0.211	-0.816	-0.036	-1.381	-0.013	0.447
	(0.181)	(0.868)	(0.508)	(1.838)	(0.649)	(1.260)	(0.255)	(0.501)
taxprop²_-1		0.137		0.122		0.190		-0.052
		(0.124)		(0.219)		(0.198)		(0.092)
taxvat_-1	-0.271**	-0.183	0.413	1.985***	-0.103	0.298	-0.663***	-0.499
	(0.109)	(0.397)	(0.363)	(0.571)	(0.300)	(0.853)	(0.133)	(0.350)
taxvat²_-1		-0.007		-0.108***		-0.040		0.022
		(0.021)		(0.029)		(0.035)		(0.017)
gfcf_-1	-0.114*	-0.100	-1.283***	-0.259***	-0.077	0.096	-0.505***	-0.083
	(0.062)	(0.069)	(0.148)	(0.091)	(0.111)	(0.115)	(0.072)	(0.052)
gfcfgr_-1	0.274***	0.267***	0.225***	0.214***	0.429**	0.265***	0.259***	0.292***
	(0.034)	(0.036)	(0.061)	(0.036)	(0.183)	(0.100)	(0.032)	(0.021)
Δdepositrate	-0.648***	-0.644***	-0.436*	-0.468***	1.063	-0.388	-0.583***	-0.573***
	(0.124)	(0.191)	(0.256)	(0.131)	(1.233)	(0.815)	(0.160)	(0.104)
ageratio_-1	-0.064	-0.053	-0.065	-0.052	-0.044	0.089**	-0.027	-0.071**
	(0.040)	(0.032)	(0.137)	(0.112)	(0.116)	(0.045)	(0.053)	(0.036)
Δdebt	-0.239***	-0.238***	-0.189**	-0.150***	-0.487*	-0.631***	-0.264***	-0.245***
	(0.050)	(0.057)	(0.082)	(0.041)	(0.258)	(0.124)	(0.047)	(0.031)
rtfpna	-4.849**	-4.240*	-6.562	0.082	2.829	1.089	-10.328***	-4.070**
	(2.074)	(2.551)	(5.536)	(4.644)	(4.246)	(3.229)	(2.677)	(1.803)
Δtotexp_-1	-0.046	-0.050	-0.088	0.002	0.315	0.517	0.053	-0.125*
	(0.091)	(0.077)	(0.154)	(0.079)	(0.654)	(0.327)	(0.104)	(0.068)
log(pop)	-0.436**	-0.421	61.785***	14.650**	0.228	-0.203	-0.926***	-0.415***
	(0.189)	(0.299)	(10.841)	(7.225)	(0.878)	(0.391)	(0.237)	(0.158)
foreigninvestment_-1	-0.004	-0.002	-0.070***	-0.006	0.028	0.044	-0.075***	-0.003
	(0.007)	(0.006)	(0.017)	(0.009)	(0.087)	(0.047)	(0.015)	(0.010)
hconsumption_-1	0.056***	0.053***	-0.214**	-0.093	0.070	0.057**	0.036	0.026
	(0.018)	(0.018)	(0.093)	(0.102)	(0.048)	(0.028)	(0.027)	(0.018)
outputgap	-0.144*	-0.138	0.690***	-0.085	-0.849**	-0.433	0.271***	-0.214***
	(0.083)	(0.103)	(0.159)	(0.091)	(0.395)	(0.312)	(0.091)	(0.061)
*Tax thresholds*
taxinc	-	-	-	-	-	-	-	-
taxfirms	-	-	-	-	-	-	-	6.27%
ssc	-	11.35%	-	-	-	-	-	-
taxpayroll	-	-	-	-	-	-	-	-
taxprop	-	-	-	-	-	-	-	-
taxvat	-	-	-	9.19%	-	-	-	-
R²	0.476	0.481	0.717	0.730	0.171	0.180	0.360	0.366
DW-Stat	1.124	1.127	1.034	1.095	1.692	1.665	n.a.	n.a.
Obs.	529	529	529	529	473	473	529	529

Table 1

Summary statistics of the variables set for investment regressions, 1980-2015

DISPLAY Table

Table 2

Linear and non-linear short-run impact results of taxation structure on investment decisions

DISPLAY Table

Table 3

Linear and non-linear long-run impact results of taxation structure on investment decisions

DISPLAY Table

Table 4

Summary of tax items threshold values for investment decisions

DISPLAY Table

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