Economics - Research Publications
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ItemDiscounting and the social time preference rate( 2007-03)This paper shows that the emphasis on a social time preference rate(defined as the sum of a pure time preference rate and the productof the elasticity of marginal valuation and the growth rate) in socialevaluations where money values are discounted using the social timepreference rate, is not advisable. It can give an entirely different, andarbitrary, ranking of alternative streams compared with the direct useof the pure time preference rate to discount ‘social welfare’ in eachperiod (where social welfare is a — usually isoelastic — function ofmoney values).
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ItemCorporation tax buoyancy and revenue elasticity in the UK( 2007-01)Observed changes in corporation tax revenues from year to year,which include the effects of changes in tax rates, deductions and compliance,appear to be highly volatile relative to profits, the tax base.This paper examines whether the ‘built-in’ fiscal drag properties ofcorporation tax can be expected to display similar properties. Simple,conceptual modelling demonstrates that the corporate tax revenueelasticity does indeed display this property in the presence of regularcyclical fluctuation in profit growth, suggesting that much of theobserved volatility is inherent to the corporation tax system.
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ItemCorporation tax revenue growth in the UK:a microsimulation analysis( 2007-01)This paper examines the built-in flexibility properties — as measuredby the elasticity of revenue with respect to profits — of the UKcorporation tax system. Emphasis is placed on determining some ofthe major influences on the extent to which total corporation taxrevenue changes when profits change over the economic cycle. A microsimulationmodel, CorpSim, is constructed and used to obtainnumerical results. In the model, corporations use group relief, capitalallowances and losses in a tax-minimising manner. The growth ofaggregate corporation tax revenue in practice in the UK appears tobe highly volatile in relation to the growth of profits. High volatilityin revenue elasticities is found to be especially associated witheconomic downturns. In mild economic downturns, corporation taxrevenue elasticities may rise (because tax growth falls less than profitgrowth), but in more severe downturns, large but temporary decreasesin revenue elasticities (and even negative elasticities) can be expected.??This research was conducted while Norman Gemmell was at HM Revenue & Customs’Analysis department. We are grateful to colleagues there for their support of this research,especially David Ulph and Edwin Ko. The views expressed in this paper are those of theauthors and do not necessarily reflect those of HMRC. We are grateful for comments fromparticipants at presentations at HMRC, HM Treasury and the New Zealand Treasury andInland Revenue Department.
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ItemModelling Behavioural Responses to Profit Taxation: the Case of the UK Corporation Tax(Department of Economics, The University of Melbourne, 2007)
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