School of Accounting and Commercial Law

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Research

The research work programme of the Chair can be grouped under three broad themes, each containing a number of projects, papers or presentations

Fiscal Policy and Growth in New Zealand and the OECD

Real GDP per capita vs .government expenditure country graph


This theme involves a number of projects/papers focused on measuring the impact of taxes and public expenditures on GDP and productivity using (i) macro data and allowing for heterogeneous fiscal-growth effects across countries and over time; and (ii) using firm-level micro data. This allows us to address such questions as: do fiscal-growth effects differ across the OCED? Do these effects feed through quickly and do they persist for long? How do tax settings affect firm-level innovation and productivity?


Project

The Impact of Taxes on Long-Run OECD Growth

Purpose This research builds on previous papers measuring the contribution of fiscal policy settings to long-run GDP growth rates. Current research is examining the robustness of fiscal-growth effects to alternative macro- and micro-based average and marginal tax rate measures and public expenditure ‘composition’ including the form of fiscal decentralization.
Researchers Norman Gemmell, Richard Kneller, Ismael Sanz
Published
Papers
Gemmell, N., Kneller, R. and Sanz, I. (2011) ‘The Timing and Persistence of Fiscal Policy Impacts on Growth: Evidence from OECD countries’, Economic Journal, 121, F33–F58.
Gemmell, N., Kneller, R. and Sanz, I. (2012), 'Fiscal decentralization and economic growth in OECD countries: matching spending with revenue decentralization', Economic Inquiry, forthcoming, (published online, January 2013). View the Data.
Gemmell and Au (2012) "Government Size, Fiscal Policy and the Level and Growth of Output: A Review of Recent Evidence", Journal of the Asia Pacific Economy, forthcoming. View the Presentation.

Working
Paper

One working paper forthcoming

Project

Corporate Taxation and Productivity Growth

Purpose This project explores how far higher rates of corporate taxation affect firm productivity convergence by reducing the after tax returns to productivity enhancing investments for small firms. It uses micro firm-level data for 11 European countries for 1996-2005 and compares results with the German tax reform ‘natural experiment’ in 2001.
Researchers Norman Gemmell, Richard Kneller, Danny McGowan, Ismael Sanz, Jose Sanz-Sanz
Working
Paper
Gemmell, N., Kneller R, McGowan, D., Sanz, I. and Sanz-Sanz, J. (forthcoming, 2013), Corporate Taxation and Productivity Catch-Up: Evidence from European Firms'.

Project

Measuring Average Marginal Income Tax Rates in New Zealand

Purpose This research has estimated effective marginal tax rates faced by individuals, and for various aggregates of taxpayers in New Zealand. Estimates are reported for a number of personal marginal income tax rate measures for New Zealand since 1907, focusing mainly on the aggregate income-weighted average marginal tax rates (AMTRs) originally proposed by Barro and Sahasakul (1983, 1986). A paper describing the methodology, and a dataset containing around a century of Statistics New Zealand income distribution and tax data are available.
Researchers Debasis Bandyopadhyay, Robert Barro, Jeremy Couchman, Norman Gemmell, Gordon Liao and Fiona McAlister
Working
Paper
Bandyopadhyay, D., Barro, R., Couchman, J., Gemmell, N., Liao, G. and McAlister, G. 'Average marginal income tax rates in New Zealand, 1907-2009', Victoria University of Wellington, Working Papers in Public Finance, WP 01/2012.


Project

Fiscal Stimuli and Fiscal Sustinability. How Big is the Trade-Off?

Purpose The fiscal fall-out following the global financial crisis, especially in the US and the Eurozone, has prompted much debate over the size of fiscal stimulus effects on the economy and the potential conflicts with sustainable fiscal policy. Using simple simulation models, this research is examining the sensitivity of long-term fiscal sustainability measures to alternative assumptions regarding government debt dynamics and the size and nature of fiscal stimulus effects.
Researcher Norman Gemmell
Working
Paper
Gemmell, N., (forthcoming, 2013), 'Fiscal stimulus versus fiscal sustainability. How big is the trade-off'.

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Personal Income Taxation : Behavioural, Revenue and Distributional Aspects

Aggregate income declared in each income band

Much of this research is based around applications of Feldstein’s (1995) ‘elasticity of taxable income’ (ETI) measure of taxpayer responses to tax rate changes. Projects in this part of the research programme are exploring both conceptual and New-Zealand specific aspects of ETI application. The role of the behavioural factors in tax gap measurement is also being examined, and current New Zealand-specific research is focussing on the impact of ageing and the fiscal (tax, expenditure) system on revenues and income redistribution.

Project

Revenue and Behavioural Respones of New Zealand Personal Income Taxpayers

Purpose This project is examining a number of aspects of the behavioural responses of New Zealand personal income taxpayers. This includes deriving ETI expressions for multi-step income tax systems, simulating revenue-maximising ETIs, and using unit record data to estimate ETIs from New Zealand’s 2001 income tax reforms.
Researchers Simon Carey, John Creedy, Norman Gemmell and Josh Teng
Published
Paper
Creedy, J. and Gemmell, N. (2012) ‘Measuring revenue responses to tax rate changes in multi-rate income tax systems: behavioural and structural factors’, International Tax and Public Finance. (Published online October, 2012). Working Paper version available.
Working
Papers
Carey, S., Creedy, J., Gemmell, N. and Teng, J. (2012). ‘Regression Estimates of the Elasticity of Taxable Income and the Choice of Instrument’. Victoria University of Wellington, Working Papers in Public Finance, 03/2012.
Creedy, J. and Gemmell, N., ‘Revenue-Maximising Elasticities of Taxable Income in Multi-Rates Income Tax Structures’. Victoria University of Wellington, Working Papers in Public Finance, 05/2012.

Project

Conventional Measures of the Tax Gap and Taxpayers' Behavioural Responses

Purpose This research is examining the reliability of alternative measures of taxpayer compliance: the so-called ‘tax gap’. Having reviewed conventional methodologies, current research is concentrating on assessing new methods proposed by the International Monetary Fund and OECD and on how taxpayers’ behavioural responses can be suitably recognised.
Researchers Norman Gemmell and John Hasseldine
Published
Papers
Gemmell, N and Hasseldine, J. (2012) ‘The tax gap: a methodological review’. Advances in Taxation, 20, December, pp.203-231. See slides presented at IRD Seminar, Feb 2013.
Gemmell, N. and Ratto, M. (2012) ‘Behavioural responses to taxpayer audits: Evidence from random enquiries of UK self-assessed taxpayers’, National Tax Journal, 65, 33-58.

Project

Tax and Social Spending Effects of Ageing

Purpose This project is part of the N.Z Treasury’s Long-Term Fiscal Statement research agenda in which Treasury examines fiscal sustainability over a 40-50 year horizon from 2013. A particular focus is on the fiscal consequences of demographic ageing and this project is examining how far the ageing process in N.Z can be expected to influence the level and composition of tax revenues, choices over social welfare spending, and the distributional aspects of these changes.
Researchers Chris Ball, John Creedy, Norman Gemmell and Katie Makle
Conference Paper Can tax rises pay for the public spending effects of ageing?’. Presentation to the NZ Treasury and Victoria University of Wellington, “Affording Our Future” Conference, VUW Business School, Wellington, December 2012. (with J. Creedy).

Project

Taxes, Transfers and the Redistribution of Income by Age and Gender in New Zealand

Purpose Following work by Aziz and others modelling the effect of long-run demographic change on the redistributive properties of the tax system, this research explores two questions. How far does the current tax/transfer system redistribute income in New Zealand? And, what is the ‘net incidence’ of fiscal policy in New Zealand over the life cycle? Both questions are analysed using the latest N.Z. Household Expenditure Survey (HES) micro data.
Researchers Omar Aziz, Norman Gemmell and Athene Laws
Published
Paper
Aziz, O., Gibbons, M., Ball, C., and Gorman, E., (2012) 'The Effect on Household Income of Government Taxation and Expenditure in 1988, 1998, 2007 and 2010'. Policy Quarterly, 8,1, 29 – 38.

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Corporate Taxation: Modelling Revenue and Behavioural Responses

IRD company return guide image with calculator

This third research theme consists of a number of related projects which together aim to provide a better understanding of how companies in New Zealand and elsewhere behave in response to the setting of corporate tax parameters. This will be relevant to subsequent modelling of the impacts of company tax policies on exporting, productivity and forecasts of company income tax revenues.

Project

The User Cost of Capital, Investment and Exporting by New Zealand Firms

Purpose New Zealand’s corporate tax imputation system means that analyses of the user cost of capital (UCC) need to account for shareholder level, as well as firm-level, taxation. This project is therefore analysing forward-looking measures of the UCC for foreign and domestic firms in New Zealand, under different share-ownership and debt-funding assumptions. A second phase of the research will use these measures to examine the responses of New Zealand investment and exports.
Researchers Richard Fabling, Norman Gemmell, Richard Kneller and Lynda Sanderson

Project

Corporate Tax Structures, Effective Tax Rates and Loss Use by New Zealand Firms

Purpose Building on the researchers’ previous work on the effect of corporate tax asymmetries on effective tax rates (ETRs), this project is analysing N.Z. Inland Revenue firm-level data on profits, losses and (backward-looking) ETRs. The objective is a better understanding of firm- and industry-level and other determinants of cross-firm differences in ETRs. Future research will build models of firms’ loss-acquisition and loss-use as tax off-sets in determining their effective tax rates and costs of capital.
Researchers John Creedy, Norman Gemmell and Sri Farley
Published
Paper
Creedy, J. and Gemmell, N (2011) ‘Corporate tax asymmetries: effective tax rates and profit shifting’. International Tax and Public Finance, 18, 422-435.