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Overview and details of the sessions of this online conference.

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The last speaker of each session is the session chair. The discussant is always the following speaker, with the first speaker being the discussant of the last paper. Each paper has a 22-minutes-block in all sessions. There should be 15 minutes and no more than 18 minutes for the presenter. The discussion is then started by the discussant. Please note that the role of the discussant is different compared to previous years: The discussant has only 1-2 minutes and s/he is not allowed to give a lengthy summary of the paper together with comprehensive comments. Instead, her/his task is to raise one single question/comment and, in doing so, start the general discussion! All participants are asked to be strict in timing to allow people to change sessions during the general discussion. For a (rare) session with less papers in the session than the time slot allows, stick to the congress schedule and use 22 minutes per presentation to allow listeners to smoothly change between sessions.

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Please note that all times are shown in the time zone of the conference. The current conference time is: 2nd Dec 2021, 12:32:14pm GMT

 
 
Session Overview
Session
A04: Corporate Tax and Investment
Time:
Wednesday, 18/Aug/2021:
10:45am - 12:15pm


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Presentations
10:45am - 11:07am

Tax Depreciation and Investment Decisions: Evidence from the Leasing Sector

Lisa Hillmann, Andreas Oestreicher

University of Goettingen, Germany

This paper examines the investment response of finance lease firms to a change in tax depreciation rules. Using an exogenous shock in Germany, our results suggest that finance lease companies, the only organisations affected by such a change, reduce their investments following the abolition of a beneficial and long-standing tax depreciation method. We provide evidence that the exposure of finance lease firms to regulatory requirements moderates the investment effect. Additional cross-sectional tests indicate a larger investment response for finance lease firms with a product portfolio specialised in mobile assets and, in particular, office and IT assets. Our findings add to the existing contributions on the effect of tax depreciation on investment decisions and to the limited literature looking into the effect of taxation on financial institutions.

Hillmann-Tax Depreciation and Investment Decisions-382.pdf


11:07am - 11:30am

Direct, Spill-Over and Welfare Effects of Place-Based Policies: Evidence from Investment Subsidies in East Germany

Nils Wehrhöfer1,2, Sebastian Siegloch1,2, Tobias Etzel3

1University of Mannheim; 2ZEW; 3Bundesbank

We study the effects of investment subsidies targeted at East German manufacturing firms post reunification. Exploiting quasi-experimental variation in the regional subsidy rates and administrative employer-employee data, we estimate the causal reduced-form policy effects. We show that a 1 percentage point decrease in the subsidy rate leads to 1 percent decrease in manufacturing employment and an increase in local unemployment. Moreover, we analyze various spill-over effects. While we do not find significant regional spill-overs within the commuting zone, we demonstrate significant local multiplier effects as the untreated construction and retail sectors are also negatively affected by the subsidy cut. Last, we assess the welfare implications of the policy by calculating the marginal value of public funds. The specific place-based policy is comparable to policies targeted at similar age groups, like unemployment insurance. Without accounting for spill-overs, the welfare effects of the policy are significantly lower.

Wehrhöfer-Direct, Spill-Over and Welfare Effects of Place-Based Policies-341.pdf


11:30am - 11:52am

Take-Up of Investment Incentives in the Euro-Area: Evidence from Finland

Elina Berghäll

VATT, Finland

To reinvigorate sluggish economic growth, the Finnish government readopted investment incentives allowing for accelerated depreciation of productive investments in 2013 – 2016. With access to detailed comprehensive firm balance sheet data on Finnish firms, the YRTTI database, I explore take-up of the accelerated depreciation allowances (ADA) on machinery and equipment investments in manufacturing. Relative to most results reported in the literature, my results show very low take-up reaching at most 5 % of the number of investments. Nevertheless, instrumental variables regressions show the ADA to have significantly raised investment. ADA has been used for large investments especially by profitable, large, exporting and/or high value-added firms. Hence, there appears to be a threshold to the ADA take-up, unrelated to awareness but rather to firm tax and financial capabilities and the effective size of the incentive.

Berghäll-Take-Up of Investment Incentives in the Euro-Area-398.pdf


11:52am - 12:15pm

The Effect of Foreign Dividend Exemption on Profit Repatriation through Dividends, Royalties, and Interest: Evidence from Japan

Makoto Hasegawa1, Michi Kakebayashi2

1Kyoto University, Japan; 2Policy Research Institute, Ministry of Finance, Japan

In 2009, Japan introduced a foreign dividend exemption system (or so-called territorial tax system) that exempted dividends received by Japanese firms from their foreign affiliates from home-country taxation. This paper examines the effects of this tax reform on profit repatriation through dividends, royalties, and interest. Under the foreign dividend exemption system, Japanese multinationals can save the tax costs of profit repatriation by repatriating dividends from foreign affiliates located in countries that impose low withholding tax rates on dividends. We find that, in response to the 2009 tax reform, Japanese-owned foreign affiliates subject to lower withholding tax rates on dividends increased dividend payouts, reduced royalties, and did not change interest payments to their parent companies. Those affiliates increased total payments to their parents. These results suggest that the affiliates partly switched their means of profit repatriation from royalties to dividends with the enactment of the foreign dividend exemption system.

Hasegawa-The Effect of Foreign Dividend Exemption on Profit Repatriation through Dividends, Royalties, and.pdf


 
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