Biørn Taxation, Technology, and the User Cost of Capital

1. Auflage 2017
ISBN: 978-1-4832-9624-1
Verlag: Elsevier Science & Techn.
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, Band Volume 182, 338 Seiten, Web PDF

Reihe: Contributions to Economic Analysis

The definition and measurement of the cost of using real capital as an input in production has been much discussed and approached in several ways in earlier literature. This present study attempts to give a unified treatment of the cost of capital services, with emphasis on its relation to the corporate tax system on the one hand, and to the production technology of the firm on the other. It provides a thorough discussion of capital as a factor of production, relating the measurement of the price of capital services to the measurement of capital stock.A parallel treatment of capital and its service price with a neo-classical technology and with a putty-clay technology is presented. The book also discusses and unifies different concepts of neutrality of income taxation presented in the public finance literature. Illustrations based on data for the manufacturing sector of the Norwegian economy are given, relating partly to the actual tax system and partly to more or less hypothetical tax reforms. The study is intended to serve as a reference for researchers in econometric model building, corporate investment behaviour, tax analysis, and national accounting.

Autoren/Hrsg.

Biørn, E.

Inhaltsverzeichnis

1;Front Cover;1
2;Taxation, Technology and the User Cost of Capital;4
3;Copyright Page;5
4;Preface;8
5;Table of Contents;10
6;Chapter 1. Introduction;14
6.1;1.1 General background;14
6.2;1.2 Outline of the monograph;18
7;Chapter 2. Basic investment criteria and the cost of capital;20
7.1;2.1 Introduction;20
7.2;2.2 The value and the rate of return of an investment project;21
7.3;2.3 Three equivalent investment criteria;23
7.4;2.4 The cost of capital interpreted as the yield from a marginal project;24
7.5;2.5 Examples;26
7.6;2.6 The rate of return and the cost of capital in the presence of an income tax;29
7.7;2.7 Concluding remarks;39
8;Chapter 3. Basic capital concepts: gross and net capital;40
8.1;3.1 Introduction;40
8.2;3.2 Capital as a capacity concept;41
8.3;3.3 Two auxiliary functions;44
8.4;3.4 A probabilistic interpretation;46
8.5;3.5 Capital as a wealth concept;49
8.6;3.6 Two examples;59
9;Chapter 4. The user cost of capital under neo-classical technology. Part 1. No taxes;64
9.1;4.1 Introduction;64
9.2;4.2 A service price interpretation;65
9.3;4.3 A shadow price interpretation based on optimizing conditions;69
9.4;4.4 Two examples ;73
9.5;4.5 A decomposition of the user value of capital services;76
10;Chapter 5. The corporate tax system;80
10.1;5.1 Introduction;80
10.2;5.2 Accounting capital and depreciation allowances;81
10.3;5.3 The tax function;85
10.4;5.4 Specific tax systems;96
10.5;5.5 A compact description. The present value of income deduction per unit of investment cost;99
11;Chapter 6. The user cost of capital under neo-classical technology. Part 2. Taxes included;108
11.1;6.1 Introduction;108
11.2;6.2 The tax corrected cash-flow and investment price;109
11.3;6.3 The tax corrected user cost of capital. General expression;112
11.4;6.4 A remark on the discounting rate. Financial constraints;114
11.5;6.5 Examples and numerical illustrations;118
12;Chapter 7. The user cost of capital under a putty-clay technology. Part 1: No taxes;134
12.1;7.1 Introduction;134
12.2;7.2 Production technology;136
12.3;7.3 The vintage specific quasi rent, profit and service life functions;141
12.4;7.4 Service price interpretations of the user cost;143
12.5;7.5 Shadow value interpretations based on optimizing conditions;148
12.6;7.6 Examples. Numerical illustrations;154
13;Chapter 8. The user cost of capital under a putty-clay technology. Part 2: Taxes included;162
13.1;8.1 Introduction;162
13.2;8.2 The vintage specific tax function, quasi rent function, and profit function;163
13.3;8.3 The tax corrected service price. The shadow value interpretation;168
13.4;8.4 The effect of the tax system on the scrapping plans and on the user cost of capital;172
14;Chapter 9. Neutrality and departure from neutrality in corporate taxation;174
14.1;9.1 Introduction. The concept of neutrality;174
14.2;9.2 General conditions for neutrality;175
14.3;9.3 The neutrality locus;181
14.4;9.4 Measures of the departure from neutrality;187
15;Chapter 10. User costs and neutrality indicators for Norwegian manufacturing;214
15.1;10.1 Introduction;214
15.2;10.2 Data and assumptions;215
15.3;10.3 Results for the existing nominal system;229
15.4;10.4 Results for systems with indexation of the income tax base;244
16;Chapter 11. Price — quantity relations: empirical illustrations for machinery in Norwegian manufacturing;252
16.1;11.1 Introduction;252
16.2;11.2 The two-parametric survival functions and their properties;253
16.3;11.3 Investment data and derived gross and net capital stocks;256
16.4;11.4 Numerical computation of the discounted per unit service function;266
16.5;11.5 Relations between the capital stock and its user cost. Decomposition of the service value;270
16.6;11.6 Additive decomposition of the user cost;276
16.7;11.7 The retirement rate. Interpretations based on prices and on quantities;278
16.8;11.8 The survival function and the degree of substitution between capital and labour;285
17;Chapter 12. Concluding remarks;294
18;Appendix A. A note on the myopic capital service price in the neo-classical model;298
19;Appendix B. A generalization: Time varying interest and inflation rates;304
20;Appendix C. A generalization: Recursion formulae for the weighting functions with non-zero discounting rates;308
21;List of symbols and notational conventions;312
22;References;320
23;Author Index;328
24;Subject Index;330