Effect of corporate income tax on investment decisions of Indian manufacturing firms

Bibliographic Data

ID12550113
AuthorsSankarganesh Karuppiah (Madras Institute of Development Studies), Karuppiah Sankarganesh (Madras School of Economics, Chennai, India), Kirubanandan Shanmugam (Madras Institute of Development Studies, corresponding author), K Rangasamy Shanmugam (Madras School of Economics, Chennai, India)
Year2021
Volume28
Issue1
Pages156-175
Publication date2021-01-24
Open AccessNo
TypeARTICLE
VenueJournal of the Asia Pacific Economy (JOURNAL)
Journal identifiersISSN: 1354-7860 • E-ISSN: 1469-9648
PublisherRoutledge (PUBLISHER • GB)
DOI10.1080/13547860.2021.1873896
OpenAlexW3125529365
LanguageEN
References cited30

This study is an attempt to empirically analyse the effect of corporate income tax on investment of manufacturing firms in India during 2005–2019, using the standard static panel model estimation techniques. It is found that the effective corporate tax rate has a negative and significant impact on the corporate investment. Moreover, the estimated effective tax elasticity is relatively low as compared to the magnitude found in other countries. The adverse impact of tax on investment is higher in private firms than in public firms and higher in pre-economic crisis period than in post-crisis period. The effective rate increases with age and size of firms. It is our hope that these results will be useful to policymakers and other stakeholders to take appropriate strategies to design the corporate tax policy such that it will not hinder business investment in India

Business · Corporate Tax · Double taxation · Economic policy · Economics · Investment (military · Monetary economics · Tax avoidance · Corporate Taxation and Avoidance · Fiscal Policy and Economic Growth · Taxation and Compliance Studies · Finance

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