November 1, 2016
Inside the Black Box: Marginal Effective Tax Rates on Capital in Canada – A Primer
Kenneth J. McKenzie, Canadian Tax Journal (2016; 64(4))
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METR Summary Tables 2005-2014 |
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Paper Citation
McKenzie, Kenneth J. (2016), “Inside the Black Box: Marginal Effective Tax Rates on Capital in Canada – A Primer”, Canadian Tax Journal Vol. 64(4), 795-816.
Paper Abstract
This article provides a primer on the marginal effective tax rate (METR) on capital, which is a measure of the investment distortions introduced by taxes levied on businesses. The article begins with a conceptual explanation of the METR, followed by a more detailed presentation of the underlying formulas. METR numbers for Canada are presented, emphasizing different dimensions along which corporate taxes may distort business investment. Some basic approaches to the neutral taxation of business income are discussed in the context of the METR formulas.
