Capital gains tax,managed funds and the value of dividends: The case of New Zealand

The taxation of capital gains for Managed Investment Funds in New Zealand was abolished in October 2007, putting these entities on a similar footing to private investors. Prior to this change most private investors were not taxed on capital gains from investments in New Zealand companies, whereas Managed Funds were taxed on these gains. New Zealand company dividends carry imputation tax credits and thus had a tax advantage for Managed Funds before October 2007. After the change the value of dividends relative to capital gains declined substantially for Managed Funds. The evidence is that the market value of the dividends, particularly for high dividends, also declined substantially subsequent to the tax change.     

Merger policy and tax competition: the role of foreign firm ownership

In many situations, governments have sector-specific tax and regulation policies at their disposal to influence the market outcome after a national or an international merger has taken place. In this paper we study the implications for merger policy when countries non-cooperatively deploy production-based taxes and firms may be partly owned by foreigners. We find that when foreign firm ownership is low in the pre-merger situation, non-cooperative tax policies are more efficient after a national merger, and smaller synergy effects are needed for this type of merger to be proposed and cleared. In contrast, cross-border mergers dominate when the degree of foreign firm ownership is high initially. These results suggest a link between increasing international portfolio diversification and the rising share of cross-border mergers.     

The intoxicating brew of black liquor and son of black liquor: Deciphering the tax planning,research, policy and financial statement implications of tax credits via financial reporting income tax disclosures

In 2007, a change in the law regarding the alternative fuel mixture credit opened the door for paper mills to qualify a byproduct of paper manufacturing, black liquor, as a fuel eligible for the credit. The credit is a refundable credit of $0.50 per gallon. Paper mills can produce hundreds of millions of gallons of black liquor per year and qualified for the credit in 2009. In addition, in 2010 the IRS determined that these firms qualified for the cellulosic biofuels producer credit. Paper mill companies could amend their 2009 tax returns and swap their alternative fuel mixture credits for cellulosic biofuels producer credits worth $1.01 per gallon. The catch was that the alternative fuels mixture credit was refundable; the cellulosic biofuels producer credit was nonrefundable.