Michael J. Daly

Productivity, scale economies and technical progress in the Canadian life insurance industry

Abstract The purpose of this paper is to examine the productivity performance of the Canadian life insurance industry. We construct a measure of total factor productivity for life insurance companies and then attempt to determine the main sources of improved productivity during the period 1961–1977 by pooling time-series and cross-section data from 31 firms. We conclude that for the industry as a whole technical progress was by far the most important source of productivity growth, while scale economies, on balance, had a marginally negative impact.

The taxation of corporate investment income in Canada: an analysis of marginal effective tax rates

This paper reports estimates of marginal effective tax rates on corporate investment income in Canada, taking into account sales taxes as well as corporation, personal, and business property taxes. Marginal effective tax rates are found to vary widely dependin g upon the type of asset acquired, the industry in which the asset is used, the manner in which the investment is financed, and the tax st atus of the investor supplying the funds. An examination of the sensi tivity of these estimates to various tax arbitrage assumptions reveal s the pattern of marginal effective tax rates to be similar irrespect ive of the arbitrage assumption used.

The impact of a hybrid personal tax system on capital accumulation and economic welfare

Abstract This paper sets up an aggregated general equilibrium simulation model of a closed economy to study the steady-state effects of alternative tax systems on saving, capital accumulation, and economic welfare. The three systems compared are a progressive income tax, a progressive general consumption tax, where all saving is tax-deductible, and a hybrid system, where households are free to allocate their saving between deductible and non-deductible forms. It is concluded that a switch to the latter system from a progressive income tax yields significantly higher welfare gains than a switch to a progressive consumption tax.

Designing a non-distortionary personal tax system for Canada

Abstract This paper discusses the design of a graduated personal tax system that does not distort the path of an individuals lifetime consumption. It is shown that such a tax system requires the existence of both tax-deductible and non-tax-deductible saving. It is also argued that the mechanisms are already in place that would permit the transformation of Canadas existing personal tax system into one similar to those proposed by Blueprints and the Meade Committee.

The treatment of registered retirement savings plans at maturity

Abstract In recent years we have witnessed a dramatic rise in the popularity of tax-deductible registered retirement savings plans as an increasing number of Canadians have taken advantage of the tax saving associated with these do-it-yourself pension schemes. As a quid pro quo , the Income Tax Act restricts the manner in which the proceeds of an RRSP can be used to generate a retirement income. This note examines the annuity aspect of RRSPs and how the imposition of such a constraint on withdrawals affects the optimal control solution to the individual planholders utility maximization problem.

Some pitfalls on the road to a neutral tax system

Abstract This note reports estimates of marginal effective tax rates for Canada that incorporate sales taxes levied on capital inputs and investigates the contributions of various taxes to the variation in tax rates. Some pitfalls concerning the process of tax reform are also discussed.

The impact of tax-deductible saving on dynamic efficiency☆

Abstract The simulations reported in this paper suggest that permitting unlimited tax deductivility for saving under a progressive personal income tax could have a more favourable impact on total personal saving and capital accumulation than even a switch to a progressive consumption tax.

The sensitivity of effective marginal tax rate calculations to alternative arbitrage assumptions

Abstract This paper reports some estimates of effective marginal tax rates under alternative assumptions regarding arbitrage and the relationship between inflation and market interest rates. It is shown that the pattern of tax rates is similar whatever assumptions are used.