Lothar Lammersen

The Effective Tax Burden of Companies and on Highly Skilled Manpower: Tax Policy Strategies in a Globalized Economy

Company taxes and taxes on highly skilled labour both influence the attractiveness of a particular region as a location for investment. We measure the effective tax burden on capital investment and on highly qualified labour in 33 locations across Europe and the United States. We then correlate both types of tax burden in order to study the different tax policy strategies applied in different countries. We identify three causes for different strategies: political institutions, preferences for redistribution and equality, and the position in globalisation and growth. Small countries, high growth rates, and federal structure with high tax autonomy stand for countries with lower tax burdens, especially on companies. Large countries, representative democracies with coalitions, and a high preference for redistribution are likely to induce higher tax burdens.

Investment Decisions and Tax Revenues Under an Allowance for Corporate Equity

In recent years, some European countries have relied on elements of an allowance for corporate equity (ACE) in the design of their tax systems. We analyse the effects of ACE-based taxation on rates of return and effective tax rates. Investment neutrality is lost if the imputed interest rate deviates from the market interest rate. With increasing profitability, the relative importance of the ACE compared with the statutory tax rate decreases. This might induce disadvantages for countries that compete for profitable, multinational companies. Revenue effects indicate that tax rates under an ACE-based tax system should not exceed those in competing countries by much.

The Measurement of Effective Tax Rates: Common Themes in Business Management and Economics

Economic agents who face the diversity of tax systems demand condensed but sophisticated information on effective tax burdens. We analyse common features and differences between important forward-looking concepts of measuring effective tax rates in business management and economics and develop some useful properties for analysing and communicating them. We explore how the instruments can be employed to provide information on the impact of taxation on decision-making, competition, and distribution. The large variety of instruments proves very useful. However, it turns out to be necessary to reveal the measurement’s scope and to carefully choose the adequate approach and measure.