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Does Taxation Stifle Corporate Investment? Firm‐Level Evidence from ASEAN Countries
Author(s) -
Cevik Serhan,
Miryugin Fedor
Publication year - 2018
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/1467-8462.12267
Subject(s) - profitability index , leverage (statistics) , investment (military) , panel data , monetary economics , business , government (linguistics) , economics , finance , linguistics , philosophy , machine learning , politics , computer science , political science , law , econometrics
This article conducts a firm‐level analysis of the effect of taxation on corporate investment, using large‐scale panel data on non‐financial firms over the period 1990–2014, and controlling for macrostructural differences among ASEAN countries. We find a significant degree of persistence in fixed investment over time, which varies with firm characteristics, such as size, growth prospects, profitability and leverage. The non‐linear estimations indicate that taxation facilitates business investment (possibly by enabling public investment in infrastructure and human capital, and the proper functioning of government institutions), but this effect turns negative and stifles private investment growth as the tax burden increases.