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In this paper, the impact of corporate income tax systems on investment at individual firms is evaluated by examining (1) distribution of marginal effective tax rates (METRs), (2) functions of tax adjusted capital costs considering personal income taxes, and (3) distribution of elasticity of METRs. To analyze the fluctuation of such an impact over the past three decades, tax adjusted capital costs and METRs are measured to estimate the investment functions and obtain the elasticity of the corporate effective tax rates on the investment rates. The results indicate that all of (1), (2) and (3) above exhibit a marked change in trend around the turn of the century. The distribution of METRs remains wide from 1970s to 1990s, but narrows after 2000. The functions of tax adjusted capital costs show little change from 1970s to 1990s, but decreases in 2000s. Likewise, while the distribution of elasticity of METRs also exhibits high values in 1970s and 1980s, the values decline in 1990s and 2000s. These findings suggest that the impact of corporate income tax systems on investment at individual firms has decreased in recent years and that other factors, such as the business environment, statutory tax rates, and economic conditions, have been playing a greater role in determining the investment decisions at firms. |
