Estimation-EMTR-EATR
Estimation of EMTRs (effective marginal tax rates) and EATRs (effective average tax rates) for CIT (Corporate income tax) with Devereux Griffith method
In order to see how the effective level of taxation with CIT (not just statutory tax rate) affected the investments, with this repository can be estimated EMTRs (effective marginal tax rates) and EATRs (effective average tax rates). Both measures are based on ‘forward looking’ approach, and are widely used in the empirical analysis of the sensitivity of investment to taxation.

EMTR measures the extent to which taxation increases the cost of capital; it corresponds to the case of a marginal project that delivers just enough profit to break even but no economic profit over and above this threshold. Positive (negative) EMTR indicates that the tax system decreases (increases) the optimal level of investment relative to the no tax case.

EATR assess tax distortions to investment choice (e.g. location), taking into account the tax on ‘infra marginal returns’ (returns on the invested total capital, not just the last unit of profitable investment), and measure the present value of tax on returns on investment, as a percentage of the present value of the pre-tax economic income or in other words this measure affect of the choice of location for investment. What is common to both measures is that they reveal how tax and non-tax parameters interact to influence effective tax rates; how inflation affects nominal and real tax liabilities and effective tax rates; how host and home country tax systems interact to influence effective tax rates and provide a basis to measure the percentage change in effective tax rates, when one or more tax parameters change (including investment incentives).