Bert Brys

Tax Policy for Economic Recovery and Growth

This paper identifies tax policy that both speeds recovery from the current economic crisis and contributes to long-run growth. This is a challenge because short-term recovery requires increases in demand while long-term growth requires increases in supply. As short-term tax concessions can be hard to reverse, this implies that policies to alleviate the crisis could compromise long-run growth. The analysis makes use of recent evidence on the impact of tax structure on economic growth to identify which growth-enhancing tax changes can also aid recovery, taking account of the need to protect those on low incomes.

Taxation and Economic Growth

This paper investigates the design of tax structures to promote economic growth. It suggests a “tax and growth” ranking of taxes, confirming results from earlier literature but providing a more detailed disaggregation of taxes. Corporate taxes are found to be most harmful for growth, followed by personal income taxes, and then consumption taxes. Recurrent taxes on immovable property appear to have the least impact. A revenue neutral growth-oriented tax reform would, therefore, be to shift part of the revenue base from income taxes to less distortive taxes such as recurrent taxes on immovable property or consumption. The paper breaks new ground by using data on industrial sectors and individual firms to show how re-designing taxation within each of the broad tax categories could in some cases ensure sizeable efficiency gains. For example, reduced rates of corporate tax for small firms do not seem to enhance growth, and high top marginal rates of personal income tax can reduce productivity growth by reducing entrepreneurial activity. While the paper focuses on how taxes affect growth, it recognises that practical tax reform requires a balance between the aims of efficiency, equity, simplicity and revenue raising. Fiscalite et croissance economique Ce document examine la meilleure elaboration du systeme fiscal afin de promouvoir la croissance economique. Il suggere une classification des impots selon le modele « fiscalite et croissance », venant etayer des resultats deja connus dans des publications anterieures, mais proposant une ventilation plus detaillee des differents impots. Il s’avere que les impots sur les societes grevent le plus la croissance, suivis par les impots sur le revenu des personnes physiques, et ensuite les impots sur la consommation. Les impots sur l’immobilier semblent les moins nocifs. Une reforme fiscale sans incidence sur les impots et orientee sur la croissance consisterait a transferer une partie de la base imposable des impots sur le revenu sur des impots moins generateurs de distorsion, comme les impots recurrents sur l’immobilier ou ceux sur la consommation. Ce document est innovant dans la mesure ou il utilise des donnees sur les secteurs industriels et les societes individuelles afin de demontrer que le fait d’elaborer une nouvelle fiscalite au sein d’une large categorie d’impots pourrait, dans certains cas, permettre un gain d’efficacite non negligeable. Par exemple, des taux reduits d’impots sur les societes pour les petites entreprises ne semble pas augmenter favoriser la croissance; de meme, des taux marginaux eleves d’impots sur les revenus des personnes physiques peut reduire la courbe de la productivite en reduisant l’activite entrepreneuriale. Alors que ce document est centre sur la maniere dont les impots affectent la croissance, il reconnait qu’une reforme fiscale pragmatique necessite un equilibre entre efficience, equite, simplicite et levee d’impots.

The Life Cycle of the Firm with Debt and Capital Income Taxes

This paper analyses the impact of capital income taxes on financial and investment decisions of corporations.Extending Sinns (1991) nucleus theory of the firm with debt finance, the model determines the optimal sources of finance (debt, newly issued equity or retained earnings), the optimal use of the investments earnings (dividends, retentions, interest payments or debt redemption), and the optimal capital accumulation throughout the life cycle of the firm.

Taxes and Firm Performance: Evidence from the OECD

The eminent contributors (including Altshuler, Creedy, Freebairn, Gravelle, Heady, Kalb, Sorensen and Zodrow) investigate the beneficial directions for medium-term tax reform in the light of global developments and lessons from the latest taxation research. In addressing this issue, they review recent advances in both the theoretical and empirical tax literature and reform evidence from individual countries. Topics covered include the impact of taxes on economic performance; international and corporate taxation; personal tax and welfare systems; environmental taxation; and country-specific tax reform experiences.