Does Taxation Stifle Corporate Investment? Firm-Level Evidence from ASEAN Countries

Serhan Cevik and Fedor Miryugin

No 2018/034, IMF Working Papers from International Monetary Fund

Abstract: This paper conducts a firm-level analysis of the effect of taxation on corporate investment patterns in member states of the Association of Southeast Asian Nations (ASEAN). Using large-scale panel data on nonfinancial firms over the period 1990–2014, and controlling for macro-structural differences among countries, we find a significant degree of persistence in firms’ net fixed investments over time, which vary with firm characteristics, such as size, sales, profitability, leverage, and age. Our analysis brings up interesting empirical results, including nonlinear patterns of behavior in firms’ capital investment decisions acrosss ASEAN countries. Concerning the main variable of interest, we find that a moderate level of taxation does not hinder business investment, but this effect turns negative as higher tax burden raises the user cost of capital and distorts resource allocations.

Keywords: WP; firm characteristic; investment behavior; firm level; nonfinancial firm; Corporate income tax; investment; leverage; firm performance; fixed investment; cost of capital; Capital spending; Public investment and public-private partnerships (PPP); Tax incidence; Private investment; Global; Southeast Asia; Asia and Pacific (search for similar items in EconPapers)
Pages: 27
Date: 2018-03-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=45666 (application/pdf)

Related works:
Journal Article: Does Taxation Stifle Corporate Investment? Firm‐Level Evidence from ASEAN Countries (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2018/034

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().