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General Equilibrium Modelling: The Integration of Policy and Project Analysis Read chapter Read first chapter

2018 | OriginalPaper | Chapter

Micro-Macro Simulation of Corporate Tax Reforms

Author : Antonella Caiumi

Published in: The New Generation of Computable General Equilibrium Models

Publisher: Springer International Publishing

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Abstract

Firm models are relatively rare in spite of the large number of models for households presented in the literature. The aim of this chapter is twofold. First, we illustrate the new microeconometric model on corporations currently used by Istat for revenue forecasting and policy analysis. Second, we discuss the advantages of combining microsimulation and computable general equilibrium models in simulating of corporate tax reforms.

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previous chapter Demand-Driven Structural Change in Applied General Equilibrium Models
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Footnotes
1
See for an example, Roggeman et al. (2014) based on the ‘European Tax Analyzer’ (Spengel 1995).
 
2
The sources involved in the integration process are the company accounts database, the ISTAT archive on national business groups, the statistical register of Italian active enterprises (acronym ASIA), information on spin-offs and mergers, and business structural surveys, in particular the survey on foreign trade (COE), the survey on Italian enterprises controlled by foreign firms (Fatsinward) and the survey on resident firms with foreign subsidiaries (Fats-outward).
 
3
For example, interest deduction add-backs (carry forwards), losses carry forwards and tax allowances carry forwards.
 
4
The ACE regime is a potential reform option that was originally proposed for the U.K by the Institute of Fiscal Studies (IFS 1991).
 
5
A first scenario is obtained reproducing the legislation implemented in 2011 onwards over some consecutive periods (first year of simulation 2008). An alternative scenario (‘Long-run ACE’) is based on the assumption that ever since 2011 the ACE allowance were applied to the entire stock of equity. This simulation exercise (counterfactual scenario) allows investigating the impact of the incremental ACE in the long run, when companies would have accomplished a process of capitalization such that they will be granted a deduction against the taxable base for the entire stock of equity.
 
6
In this exercise, the ATR for year 2012 is computed directly from the tax returns data filed by corporations and fiscal groups (“UnicoSC” form and “CNM” form). The MATIS model was used to estimate the two alternative scenarios as described in footnote 4.
 
Literature
Ahmed, S. (2006). Corporate Tax Models: A Review. SBP Working Paper Series, (13).
Bhattarai, K., Haughton, J., Head, M., & Tuerck, D. G. (2017). Simulating corporate income tax reform proposals with a dynamic CGE model. International Journal of Economics and Finance, 9(5), 20–35.CrossRef
Branzoli, N., & Caiumi, A. (2017). Tax incentives and firm capital structure: evidence from the Italian ACE regime. Taxation Papers, European Commission, forthcoming.
Buslei, H., Bach, S., & Simmler, M. (2014). Firm level models. Handbook of microsimulation modelling, Contributions to Economic Analysis (Vol. 293, pp. 479–503). Emerald Group Publishing Limited.CrossRef
Caiumi, A., & Di Biagio, L. (2014). The redistributive effects of an ACE Tax: The case of Italy, Paper presented at the 70th Annual Congress of the International Institute of Public Finance, August 20–23, 2014. Lugano, Switzerland. www.​iipf.​org.
Caiumi, A., & Di Biagio, L. (2015). Corporate effective taxation in Italy using a new microsimulation model (Istat–MATIS). Istat Working Papers, 13.
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Finke, K., Heckemeyer, J., Reister, T., & Spengel, C. (2013). Impact of tax-rate cut cum base-broadening reforms on heterogeneous firms: Learning from the German tax reform of 2008. Finanzarchiv: Public Finance Analysis, 69(1), 72–114.CrossRef
Finke, K., Heckemeyer, J., & Spengel, C. (2014). Assessing the impact of introducing an ACE regime (pp. 14–033). ZEW Discussion Paper: A Behavioural Corporate Microsimulation Analysis for Germany.
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Metadata
Title
Micro-Macro Simulation of Corporate Tax Reforms
Author
Antonella Caiumi
Copyright Year
2018
Book
The New Generation of Computable General Equilibrium Models

Print ISBN: 978-3-319-58532-1

Electronic ISBN: 978-3-319-58533-8

Copyright Year: 2018

DOI
https://doi.org/10.1007/978-3-319-58533-8_3