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Essays on business taxation and development

Brockmeyer, Anne (2013) Essays on business taxation and development. PhD thesis, London School of Economics and Political Science.

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This thesis addresses a number of questions on the optimal taxation of firms, with particular emphasis on the challenges to taxation in developing economies. Chapter 1 exploits bunching of firms at a tax kink to identify the effect of a tax rate change on investment. Building on the standard bunching framework, I estimate the frequency distribution of firms around the kink, and the share of bunching firms with excess investment. I apply this approach to administrative tax returns for firms in the United Kingdom and find that excess investment explains up to 20% of bunch ing. Chapter 2 examines the trade-off between production efficiency and revenue efficiency in taxation under imperfect enforcement. We exploit quasi-experimental variation created by a minimum tax scheme, a production inefficient policy used in many developing countries, which consists of taxing firms on turnover as their profit rate falls below a certain threshold. Using administrative tax records of corporations in Pakistan, we find large bunching around the profit rate kink createded by the minimum tax scheme and estimate that the turnover tax reduces evasion by up to 60-70% of corporate income. Chapter 3 analyzes the impact of interventions by the International Monetary Fund (IMF) on countries’ likelihood of adopting the value added tax (VAT). I discuss how the IMF has promoted VAT adoption by making lending conditional on adoption, providing administrative and technical assistance, and reducing the political costs of adoption. Applying a Cox proportional hazard model to a cross-country panel for the period 1975-2000, I find that countries that are under a lending agreement with the IMF are three times as likely to adopt the VAT than are countries not under a lending agreement.

Item Type: Thesis (PhD)
Additional Information: © 2013 Anne Brockmeyer
Library of Congress subject classification: H Social Sciences > HG Finance
Sets: Departments > Economics

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