/*******************************************************************************
Title: ETR model ado file
Author: Andualem Mengistu & Shafik Hebous
Email: amengistu2@imf.org
Date created: October 11, 2024
Description: Master file for running the METR and AETR simulation
Version: 0.1.0
*******************************************************************************/
capture program drop dietr
program define dietr
version 15
set type double
// Declare the syntax to accept any type of variable (numeric or string) and fallback parameter values
syntax , id(varlist) taxrate(varlist numeric) inflation(varlist numeric) ///
depreciation(varlist numeric) delta(varlist numeric) deprtype(varlist string) ///
[realint(varlist numeric) debt(varlist numeric) newequity(varlist numeric) holiday(varlist numeric) ///
pitdiv(varlist numeric) pitint(varlist numeric) pitcgain(varlist numeric) ///
qrtc(real 0) nqrtc(real 0) sbie(real 1.5) minrate(real 0.15) p(real 0.1) ///
system(string) minimumtax(string) refund(string)]
**Note
*The following varibales are required: id(varlist) taxrate(varlist numeric) inflation(varlist numeric) depreciation (varlist numeric) delta (varlist numeric) deprtyp(varlist numeric). One can assign any variable as id, any numerical variable as taxrate, etc.
*The following are optional variables: realint(varlist numeric) debt(varlist numeric) newequity(varlist numeric) holiday(varlist numeric).
*The following are parameters: qrtc(real 0) nqrtc(real 0) sbie(real 150) minrate(real 0.15) p(real 0.1) system(string) minimumtax(string) refund(string)
*======= Validate variables=========================
// Check if the `id` variable exists in the dataset
capture confirm variable `id'
if _rc != 0 {
display "Error: The specified variable `id' does not exist in the dataset."
exit 1
}
// Determine the type of the variable `id`
local type : type `id'
// General handling for both string and numeric variables
if regexm("`type'", "^str") {
encode `id', gen(id_e)
display "The string variable `id' has been encoded as 'id_e' from 1 to N."
}
else if regexm("`type'", "^(int|long|byte|float|double)$") {
quietly egen id_e = group(`id')
display "The numeric variable `id' has been encoded as 'id_e' from 1 to N."
}
else {
display "Error: The variable `id' must be either string or numeric."
exit 1
}
*=========Assigning default values for optional variables (realint, debt, holiday)
// Real interest rate
if "`realint'" == "" {
local r 0.05
display "Optional variable 'realint' not provided; using default value: `realint'"
}
else {
capture confirm variable `realint'
if _rc == 0 {
local r `realint'
display "Using variable for r: `r'"
if `r' < 0.01 | `r' > 0.2 {
display "The specified real interest rate value is out of the acceptable range. Acceptable range is 0.01 to 0.2."
exit 125
}
}
else {
local r 0.05
display "Variable 'realint' does not exist; using default value: `r'"
}
}
// Debt (Share of finance)
if "`debt'" == "" {
local debt_v 0
display "Optional variable 'debt' not provided; using default value: `debt_v'"
}
else {
capture confirm variable `debt'
if _rc == 0 {
local debt_v `debt'
display "Using variable for debt: `debt'"
if `debt_v' < 0 | `debt_v' > 1 {
display "The specified debt financing ratio is out of the acceptable range. Acceptable range is 0 to 1."
exit 125
}
}
else {
local debt_v 0
display "Variable 'debt' does not exist; using default value: `debt_v'"
}
}
// New Eqity (share of finance)
if "`newequity'" == "" {
local newequity_v 0
display "Optional variable 'newequity' not provided; using default value: `newequity_v'"
}
else {
capture confirm variable `newequity'
if _rc == 0 {
local newequity_v `newequity'
display "Using variable for new equity: `newequity'"
if `newequity_v' < 0 | `newequity_v' > 1 {
display "The specified new equity financing ratio is out of the acceptable range. Acceptable range is 0 to 1."
exit 125
}
}
else {
local newequity_v 0
display "Variable 'newequity' does not exist; using default value: `newequity_v'"
}
}
**Limiting the total share of debt and equity finance
if `newequity_v'+ `debt_v' >1 {
display "The share of new equity and debt finance can not exceed 100%."
exit 125
}
// Tax holiday
if "`holiday'" == "" {
local holiday_v 0
display "Optional variable 'holiday' not provided; using default value: `holiday_v'"
}
else {
capture confirm variable `holiday'
if _rc == 0 {
local holiday_v `holiday'
display "Using variable for holiday: `holiday'"
if `holiday_v' < 0 | `holiday_v'> 100 {
display "The specified tax holiday period is out of the acceptable range. Acceptable range is 0 to 100."
exit 125
}
}
else {
local holiday_v 0
display "Variable 'holiday' does not exist; using default value: `holiday_v'"
}
}
// Witholding rate on dividends
foreach var in pitdiv pitint pitcgain {
if "`var'" == "" {
local `var'_v 0
display "Optional variable '`var'' not provided; using default value: ``var'_v'"
}
else {
capture confirm variable `var'
if _rc == 0 {
local `var'_v `var'
display "Using variable for `var': `var'"
}
else {
local `var'_v 0
display "Optional variable '`var'' does not exist; using default value: ``var'_v'"
}
}
}
// Default values for string parameters
if "`system'" == "" {
local system "cit"
}
if "`minimumtax'" == "" {
local minimumtax "no"
}
if "`refund'" == "" {
local refund "yes"
}
local profit = `p'
// Parameter validation
if `p' < 0 | `p' > 1 {
display "The specified profitability value is out of the acceptable range. Acceptable range is 0 to 1"
exit 125
}
if `qrtc' < 0 | `qrtc' > 0.2 {
display "The specified QRTC parameter is out of the acceptable range. Acceptable range is 0 to 0.2"
exit 125
}
if `nqrtc' < 0 | `nqrtc' > 0.2 {
display "The specified NQRTC parameter is out of the acceptable range. Acceptable range is 0 to 0.2"
exit 125
}
if `sbie' < 0 | `sbie' > 2 {
display "The specified SBIE parameter is out of the acceptable range. Acceptable range is 0 to 2"
exit 125
}
local profit = `p'
quietly {
// Create a temporary dataset to store results
// Generate t (0 to 199) for 200 periods
expand 100
by id_e, sort: gen t = _n - 1
// Calculate necessary variables
gen i = `r' + `inflation' + `r' * `inflation'
// Parameters based on the intereaction of PIT and CIT
gen gamma=(1- `pitdiv_v')/(1-`pitcgain_v') //((1-m_d))/((1-z)(1-c))=γ
gen rho=(1- `pitint_v')*i/(1-`pitcgain_v') //(1-m_i )i/((1-z))=Ï
gen A_decline=`depreciation'*(1+rho)/(`depreciation'+ rho) // present value of depreciation (declining balance), accounting for PIT
gen A_straight=`depreciation'*((1+rho)/rho)*(1-(1/((1+rho)^(1/`depreciation')))) // present value of depreciation (straight line), accounting for PIT
// Calculate SBIE based on depreciation method
gen double SBIE = 0
replace SBIE = 0.05 * (`sbie') * (1 - `depreciation')^t if `deprtype'=="db"
// Substance based income exclusion is 5% of capital and payroll. If missing, we use 150% as the tangible asset=tax depreciated value of the asset.
//payroll is half of tagible asst. 5%*1.5*(1-phi)^t=7.5%*(1-phi)^t
replace SBIE = 0.05 * (`sbie') * max((1 - t *`depreciation'), 0) if `deprtype'=="sl"
la var SBIE "Substance based income exclusion under declining balance depreciation"
// Calculate QRTC and NQRTC
gen QRTC = 0
replace QRTC = (`qrtc' / 100) * (1 - `delta')^t if t >= 1
gen NQRTC = 0
replace NQRTC = (`nqrtc' / 100) * (1 - `delta')^t if t >= 1
tempfile generalparameter
save `generalparameter', replace
************************************************
// Calculate profit and taxes
if "`refund'"=="yes" {
gen double revenue=0
by id_e, sort: replace revenue=0 if t==0 // revenue in period 0
by id_e, sort: replace revenue=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1) if t>0 // revenue in period t>0
by id_e, sort: gen double revenue_time=revenue/((1 + rho) ^ t) // discounted value of revenue
by id_e, sort: egen double revenue_NPV= total(revenue_time) // NPV of revenue
***Standard CIT
if "`system'"=="cit" {
preserve
gen double profit_cit = 0
**Delclining balance
by id_e, sort: replace profit_cit = -`depreciation' if t == 0 & `deprtype'=="db"
by id_e, sort: replace profit_cit = (`p' + `delta') * ((1 + `inflation')^t) * (1 - `delta')^(t - 1) - `depreciation' * (1 - `depreciation')^t - `debt_v' * i * ((1 + `inflation') * (1 - `delta'))^(t - 1) if t > 0 & `deprtype'=="db"
**Straight line
by id_e, sort: replace profit_cit = -`depreciation' if t == 0 & `deprtype'=="sl"
by id_e, sort: replace profit_cit = (`p' + `delta') * ((1 + `inflation')^t) * (1 - `delta')^(t - 1) - min(max(1 - t * `depreciation', 0), `depreciation') - `debt_v' * i * ((1 + `inflation') * (1 - `delta'))^(t - 1) if t > 0 & `deprtype'=="sl"
// Calculate tax and AETR
gen double Tax_cit = 0
by id_e, sort: replace Tax_cit = (`taxrate') * profit_cit - QRTC - min(max(`taxrate'*profit_cit, 0), NQRTC) if `holiday_v'==0
by id_e, sort: replace Tax_cit = -QRTC if t<=`holiday_v' & `holiday_v'>0
by id_e, sort: replace Tax_cit = (`taxrate') * profit_cit - QRTC - min(max(`taxrate'*profit_cit, 0), NQRTC) if t > `holiday_v' & `holiday_v'>0
by id_e, sort: gen double Tax_cit_time = Tax_cit / ((1 + rho)^t)
by id_e, sort: egen double Tax_cit_NPV = total(Tax_cit_time)
tempfile cit_pregoble // This will be used later to generate the AETR for the case where there is a top-up tax
save `cit_pregoble'
by id_e, sort: gen econrent_cit=gamma*(revenue_NPV-1-Tax_cit_NPV)+ `newequity_v'*(gamma-1)+ `debt_v'*gamma*( rho-i)/( rho-`inflation'+`delta'*(1+`inflation'))
by id_e, sort: gen double AETR_CIT=100*((`p'-`r')/(`r'+`delta')-econrent_cit)/(`p'/(`r'+`delta'))
drop t i gamma rho SBIE A_decline A_straight NQRTC QRTC revenue revenue_* profit_* Tax_* econrent_*
duplicates drop
la var AETR_CIT "AETR of a standard CIT (%)"
format AETR* %9.02f
tempfile pre_globe
save `pre_globe.dta', replace
restore
}
***R-based cashflow tax
if "`system'"=="cft" {
preserve
gen double profit_cft = 0
by id_e, sort: replace profit_cft=-1 if t==0 // period 0 taxable income
by id_e, sort: replace profit_cft=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1) if t>=1
la var profit_cft "profit under a refundable cahsflow tax"
gen double Tax_cft=0
replace Tax_cft=(`taxrate') * profit_cft -QRTC-min(max(`taxrate'*profit_cft,0),NQRTC) if `holiday_v'==0
// period by period tax liability (if taxable income is negative, then tax is also negative (i.e., refund))
replace Tax_cft=-QRTC if t<=`holiday_v' & `holiday_v'>0
replace Tax_cft=(`taxrate') * profit_cft -QRTC-min(max(`taxrate'*profit_cft,0),NQRTC) if t>`holiday_v' & `holiday_v'>0
by id_e, sort: gen double Tax_cft_time= Tax_cft/((1 + rho) ^ t) // The discounted value of each peruiod's tax liability
by id_e, sort: egen double Tax_cft_NPV= total(Tax_cft_time) // NPV of the the sum of taxes paid
tempfile cft_pregoble // This will be used later to generate the AETR for the case where there is a top-up tax
save `cft_pregoble'
by id_e, sort: gen econrent_cft=gamma*(revenue_NPV-1-Tax_cft_NPV)+ `newequity_v'*(gamma-1)+ `debt_v'*gamma*( rho-i)/( rho-`inflation'+`delta'*(1+`inflation'))
by id_e, sort: gen double AETR_CFT=100*((`p'-`r')/(`r'+`delta')-econrent_cft)/(`p'/(`r'+`delta'))
drop t i gamma rho SBIE A_decline A_straight NQRTC QRTC revenue revenue_* profit_* Tax_* econrent_*
duplicates drop
la var AETR_CFT "AETR of an R-based cash flow tax (%)"
format AETR* %9.02f
tempfile pre_globe
save `pre_globe.dta', replace
restore
}
***ACE
if "`system'"=="ace" {
preserve
gen double profit_ace=0
**Declining balance
by id_e, sort: replace profit_ace=-`depreciation' if t==0 & `deprtype'=="db" //taxable income in period 0
by id_e, sort: replace profit_ace=(`p'+`delta')*((1+`inflation')^t)*((1-`delta')^(t-1))-`depreciation'*(1-`depreciation')^t-i*(1-`depreciation')^t if t>0 & `deprtype'=="db"
**Straight line
by id_e, sort: replace profit_ace=-`depreciation' if t==0 & `deprtype'=="sl" //taxable income in period 0
by id_e, sort: replace profit_ace=(`p'+`delta')*((1+`inflation')^t)*((1-`delta')^(t-1))-min(max(1-t*`depreciation',0),`depreciation')-i*max((1-t*`depreciation'),0) if t>0 & `deprtype'=="sl"
la var profit_ace "profit under a refundable ACE"
gen double Tax_ace=0
by id_e, sort: replace Tax_ace=(`taxrate')*profit_ace -QRTC-min(max(`taxrate'*profit_ace,0),NQRTC) if `holiday_v'==0
// period by period tax liability (if taxable income is negative, then tax is also negative (i.e., refund))
by id_e, sort: replace Tax_ace=-QRTC if t<=`holiday_v' & `holiday_v'>0 // period by period tax liability (if taxable income is negative, then tax is also negative (i.e., refund))
by id_e, sort: replace Tax_ace=(`taxrate') * profit_ace -QRTC-min(max(`taxrate'*profit_ace,0),NQRTC) if t>`holiday_v' & `holiday_v'>0
by id_e, sort: gen double Tax_ace_time= Tax_ace/((1 + rho) ^ t) // The discounted value of each period's tax liability
by id_e, sort: egen double Tax_ace_NPV= total(Tax_ace_time) // NPV of the the sum of taxes paid
tempfile ace_pregoble // This will be used later to generate the AETR for the case where there is a top-up tax
save `ace_pregoble'
by id_e, sort: gen econrent_ace=gamma*(revenue_NPV-1-Tax_ace_NPV)+ `newequity_v'*(gamma-1)+ `debt_v'*gamma*( rho-i)/( rho-`inflation'+`delta'*(1+`inflation'))
by id_e, sort: gen double AETR_ACE=100*((`p'-`r')/(`r'+`delta')-econrent_ace)/(`p'/(`r'+`delta'))
drop t i gamma rho SBIE A_decline A_straight NQRTC QRTC revenue revenue_* profit_* Tax_* econrent_*
duplicates drop
la var AETR_ACE "AETR of an ACE system (%)"
format AETR* %9.02f
tempfile pre_globe
save `pre_globe.dta', replace
restore
}
}
if "`refund'" == "no" {
gen double revenue=0
by id_e, sort: replace revenue=0 if t==0 // revenue in period 0
by id_e, sort: replace revenue=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1) if t>0 // revenue in period t>0
by id_e, sort: gen double revenue_time=revenue/((1 + rho) ^ t) // discounted value of revenue
by id_e, sort: egen double revenue_NPV= total(revenue_time)
if "`system'" == "cit" {
preserve
gen double profit_cit = 0
**Declining balance
by id_e, sort: replace profit_cit=(`p'+`delta')*((1+`inflation'))-`depreciation'-`depreciation'*(1-`depreciation') -`debt_v'*i if t==1 & `deprtype'=="db" // taxable income in period 1
by id_e, sort: replace profit_cit=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-`depreciation'*(1-`depreciation')^t -`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + min(0,profit_cit[_n-1]) if t>1 & `deprtype'=="db" // taxable income after period 1
**Straight line
by id_e, sort: replace profit_cit=(`p'+`delta')*(1+`inflation')-`depreciation'-min(max(1-`depreciation',0),`depreciation')-`debt_v'*i if t==1 & `deprtype'=="sl"
// (including loss carryforward due to non-refundability)
by id_e, sort: replace profit_cit=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-min(max(1-t*`depreciation',0),`depreciation') -`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + min(0,profit_cit[_n-1]) if t>1 & `deprtype'=="sl" // taxable income in periods after period 1
la var profit_cit "profit under a refundable standard CIT."
gen double Tax_cit = 0
by id_e, sort: replace Tax_cit = (`taxrate') *max(profit_cit,0) - QRTC - min(max(`taxrate'*profit_cit, 0), NQRTC) if `holiday_v'==0
by id_e, sort: replace Tax_cit = -QRTC if t <=`holiday_v' & `holiday_v'>0
by id_e, sort: replace Tax_cit = (`taxrate') *max(profit_cit,0) - QRTC - min(max(`taxrate'*profit_cit, 0), NQRTC) if t >`holiday_v' & `holiday_v'>0
by id_e, sort: gen double Tax_cit_time = Tax_cit / ((1 + rho)^t)
by id_e, sort: egen double Tax_cit_NPV = total(Tax_cit_time)
tempfile cit_pregoble // This will be used later to generate the AETR for the case where there is a top-up tax
save `cit_pregoble'
by id_e, sort: gen econrent_cit=gamma*(revenue_NPV-1-Tax_cit_NPV)+ `newequity_v'*(gamma-1)+ `debt_v'*gamma*(rho-i)/( rho-`inflation'+`delta'*(1+`inflation'))
by id_e, sort: gen double AETR_CIT=100*((`p'-`r')/(`r'+`delta')-econrent_cit)/(`p'/(`r'+`delta'))
drop t i gamma rho SBIE A_decline A_straight NQRTC QRTC revenue revenue_* profit_* Tax_* econrent_*
duplicates drop
la var AETR_CIT "AETR of a standard CIT (%)"
format AETR* %9.02f
tempfile pre_globe
save `pre_globe.dta', replace
restore
}
***R-based cashflow tax
if "`system'"=="cft" {
preserve
gen double profit_cft = 0
by id_e, sort: replace profit_cft=(`p'+`delta')*(1+`inflation')-1 if t==1
by id_e, sort: replace profit_cft=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1) + min(0,profit_cft[_n-1]) if t>1
la var profit_cft "profit under a refundable cahsflow tax"
gen double Tax_cft=0
replace Tax_cft=(`taxrate') * max(profit_cft,0) -QRTC-min(max(`taxrate'*profit_cft,0),NQRTC) if `holiday_v'==0
replace Tax_cft=-QRTC if t<=`holiday_v' & `holiday_v'>0
replace Tax_cft=(`taxrate') * max(profit_cft,0) -QRTC-min(max(`taxrate'*profit_cft,0),NQRTC) if t>`holiday_v' & `holiday_v'>0
by id_e, sort: gen double Tax_cft_time= Tax_cft/((1 + rho) ^ t) // The discounted value of each peruiod's tax liability
by id_e, sort: egen double Tax_cft_NPV= total(Tax_cft_time) // NPV of the the sum of taxes paid
tempfile cft_pregoble // This will be used later to generate the AETR for the case where there is a top-up tax
save `cft_pregoble'
by id_e, sort: gen econrent_cft=gamma*(revenue_NPV-1-Tax_cft_NPV)+ `newequity_v'*(gamma-1)+ `debt_v'*gamma*( rho-i)/( rho-`inflation'+`delta'*(1+`inflation'))
by id_e, sort: gen double AETR_CFT=100*((`p'-`r')/(`r'+`delta')-econrent_cft)/(`p'/(`r'+`delta'))
drop t i gamma rho SBIE A_decline A_straight NQRTC QRTC revenue revenue_* profit_* Tax_* econrent_*
duplicates drop
la var AETR_CFT "AETR of an R-based cash flow tax (%)"
format AETR* %9.02f
tempfile pre_globe
save `pre_globe.dta', replace
restore
}
***ACE
if "`system'"=="ace" {
preserve
gen double profit_ace=0
**Declining balance
by id_e, sort: replace profit_ace=(`p'+`delta')*(1+`inflation')-`depreciation'-`depreciation'*(1-`depreciation')-i*(1-`depreciation')^t if t==1 & `deprtype'=="db" //taxable income in period 1
by id_e, sort: replace profit_ace=(`p'+`delta')*((1+`inflation')^t)*((1-`delta')^(t-1))-`depreciation'*(1-`depreciation')^t-i*(1-`depreciation')^t + min(0,profit_ace[_n-1]) if t>1 & `deprtype'=="db"
**Straight line
by id_e, sort: replace profit_ace=(`p'+`delta')*(1+`inflation')-`depreciation'-min(max(1-`depreciation',0),`depreciation')-i*(1-`depreciation') if t==1 & `deprtype'=="sl" //taxable income in period 1
by id_e, sort: replace profit_ace=(`p'+`delta')*((1+`inflation')^t)*((1-`delta')^(t-1))-min(max(1-t*`depreciation',0),`depreciation')-i*max((1-t*`depreciation'),0) + min(0,profit_ace[_n-1]) if t>1 & `deprtype'=="sl"
la var profit_ace "profit under a refundable ACE"
gen double Tax_ace=0
by id_e, sort: replace Tax_ace=(`taxrate')*max(profit_ace,0) -QRTC-min((`taxrate')*max(profit_ace,0),NQRTC) if `holiday_v'==0
by id_e, sort: replace Tax_ace=-QRTC if t<=`holiday_v' & `holiday_v'>0
by id_e, sort: replace Tax_ace=(`taxrate')*max(profit_ace,0) -QRTC-min((`taxrate')*max(profit_ace,0),NQRTC) if t>`holiday_v' & `holiday_v'>0
by id_e, sort: gen double Tax_ace_time= Tax_ace/((1 + rho) ^ t) // The discounted value of each period's tax liability
by id_e, sort: egen double Tax_ace_NPV= total(Tax_ace_time) // NPV of the the sum of taxes paid
tempfile ace_pregoble // This will be used later to generate the AETR for the case where there is a top-up tax
save `ace_pregoble'
by id_e, sort: gen econrent_ace=gamma*(revenue_NPV-1-Tax_ace_NPV)+ `newequity_v'*(gamma-1)+ `debt_v'*gamma*( rho-i)/( rho-`inflation'+`delta'*(1+`inflation'))
by id_e, sort: gen double AETR_ACE=100*((`p'-`r')/(`r'+`delta')-econrent_ace)/(`p'/(`r'+`delta'))
drop t i gamma rho SBIE A_decline A_straight NQRTC QRTC revenue revenue_* profit_* Tax_* econrent_*
duplicates drop
la var AETR_ACE "AETR of an ACE system (%)"
format AETR* %9.02f
tempfile pre_globe
save `pre_globe.dta', replace
restore
}
} // closes the non-refundable routine
if "`minimumtax'"=="no" {
use `pre_globe.dta', clear
format AETR* %9.02f
tempfile aetr
save `aetr', replace
}
/*=========================================================================================================================================================
Section 2: Adding the effect of the GloBE rules
In this section, we calculate AETR when there is a top-up tax
===========================================================================================================================================================*/
if "`minimumtax'"=="yes" {
if "`refund'"=="yes" | "`refund'"=="no" {
if "`system'"=="cit" {
********Standard CIT
*Covered income
gen double profit_cit_tpt=0 //the basis for covered tax
gen double cov_profit_cit=0 //Covered income
**Declining balance
by id_e, sort: replace profit_cit_tpt=(`p'+`delta')*(1+ `inflation')-`depreciation'-`depreciation'*(1-`depreciation')-`debt_v'*i if t==1 & `deprtype'=="db"
by id_e, sort: replace profit_cit_tpt=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-`depreciation'*(1-`depreciation')^t -`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + min(0,profit_cit_tpt[_n-1]) if t>1 & `deprtype'=="db"
// covered profit considered for the top-up tax
by id_e, sort: replace cov_profit_cit=(`p'+`delta')*(1+`inflation')-`depreciation'-`depreciation'*(1-`depreciation')-`debt_v'*i +QRTC if t==1 & `deprtype'=="db"
by id_e, sort: replace cov_profit_cit=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-`depreciation'*(1-`depreciation')^t -`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) +QRTC+ min(0,cov_profit_cit[_n-1]) if t>1 & `deprtype'=="db"
la var cov_profit_cit "covered income of a standard CIT"
**Straight line
by id_e, sort: replace profit_cit_tpt=(`p'+`delta')*(1+`inflation')-`depreciation'-min(max(1-`depreciation',0),`depreciation') -`debt_v'*i if t==1 & `deprtype'=="sl"
by id_e, sort: replace profit_cit_tpt=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-min(max(1-t*`depreciation',0),`depreciation') -`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + min(0,profit_cit_tpt[_n-1]) if t>1 & `deprtype'=="sl"
by id_e, sort: replace cov_profit_cit=(`p'+`delta')*(1+`inflation')-`depreciation'-min(max(1-`depreciation',0),`depreciation')-`debt_v'*i +QRTC if t==1 & `deprtype'=="sl"
by id_e, sort: replace cov_profit_cit=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-min(max(1-t*`depreciation',0),`depreciation') -`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) +QRTC+ min(0,cov_profit_cit[_n-1]) if t>1 & `deprtype'=="sl"
la var cov_profit_cit "covered income of a standard CIT"
*top-up tax base
gen double exprofit_cit=max(0,cov_profit_cit-SBIE)
la var exprofit_cit "Excess profit under stndard CIT and declining balance depreciation"
*The top-up tax rate is 15% minus the GloBE effetive tax rate (i.e., covered tax divided by covered income). Note that in the absence of qualified refundable tax credit, then the ETr is similar to the statutory tax rate. Therefore, the top-up rate can be calaucltes as max(0, 15%-statutory tax rate).
gen double covtax_cit=0 // covered tax
by id_e, sort: replace covtax_cit=`taxrate'*max(0,profit_cit_tpt)-min((`taxrate')*max(0,profit_cit_tpt),NQRTC) if `holiday_v'==0
by id_e, sort: replace covtax_cit=`taxrate'*max(0,profit_cit_tpt)-min((`taxrate')*max(0,profit_cit_tpt),NQRTC) if t>`holiday_v' & `holiday_v'>0
gen tpr_cit=0
by id_e, sort: replace tpr_cit=max(0,`minrate'-(covtax_cit)/cov_profit_cit) if cov_profit_cit>0 //the top-up tax in each period
la var tpr_cit "Top up tax rate under stanadrd CIT"
*top-up tax amount
by id_e, sort: gen double tpt_cit=tpr_cit*exprofit_cit/(1+rho)^t // top-up tax (discounted value)
by id_e, sort: egen double total_tpt_cit=total(tpt_cit) // The NPV of top-up taxes paid
merge 1:1 id_e t using `cit_pregoble' // This merges the taxes paid before the top-up
drop _merge
by id_e, sort: gen econrent_cit=gamma*(revenue_NPV-1-Tax_cit_NPV-total_tpt_cit)+ `newequity_v'*(gamma-1)+ `debt_v'*gamma*( rho-i)/( rho-`inflation'+`delta'*(1+`inflation'))
by id_e, sort: gen double AETR_CIT=100*((`p'-`r')/(`r'+`delta')-econrent_cit)/(`p'/(`r'+`delta'))
la var tpt_cit "top-up tax (discounted value)"
la var total_tpt_cit "NPV of all top-up taxes paid: under the standard CIT"
la var AETR_CIT "The average effective tax rate under the standard CIT"
drop t i SBIE gamma rho revenue revenue_* A_decline A_straight NQRTC QRTC profit_* covtax_* tpr_* tpt_* total_tpt_* exprofit_* cov_profit_* Tax_* econrent_*
duplicates drop
la var AETR_CIT "AETR of a standard CIT (%)"
format AETR* %9.02f
} // refundor non-refund closed
// CIT closed
if "`system'"=="cft" {
********** R-based cashflow tax
*Covered income (involves deduction of iterest since interest deduction is allowed under the GloBE rules)
*profit_cft_tpt (i.e., the tax base based on which domestic tax is calcualted) (doesn't involve interest deduction)
*Note that although the firms receives immediate expensing, from a GloBE persepctive, it is a timing issue. Therefore, the taxbase is calculated similar to the taxbase for standard CIT.
gen double profit_cft_tpt=0
gen double cov_profit_cft=0
**declining balance
by id_e, sort: replace profit_cft_tpt=(`p'+`delta')*(1+ `inflation')-`depreciation'-`depreciation'*(1-`depreciation') if t==1 & `deprtype'=="db"
by id_e, sort: replace profit_cft_tpt=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-`depreciation'*(1-`depreciation')^t + min(0,profit_cft_tpt[_n-1]) if t>1 & `deprtype'=="db"
// covered profit considered for the top-up tax
by id_e, sort: replace cov_profit_cft=(`p'+`delta')*(1+`inflation')-`depreciation'-`depreciation'*(1-`depreciation')-`debt_v'*i +QRTC if t==1 & `deprtype'=="db"
by id_e, sort: replace cov_profit_cft=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-`depreciation'*(1-`depreciation')^t -`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) +QRTC+ min(0,cov_profit_cft[_n-1]) if t>1 & `deprtype'=="db"
la var cov_profit_cft "covered tax of a refundable R"
**straight line
by id_e,sort: replace profit_cft_tpt=(1+`inflation')*(`p'+`delta')-`depreciation'-min(max(1-`depreciation',0),`depreciation') if t==1 & `deprtype'=="sl" // accounting for loss carryforward from period 0
by id_e,sort: replace profit_cft_tpt=(1+`inflation')^t*(`p'+`delta')*(1-`delta')^(t-1)-min(max(1-t*`depreciation',0),`depreciation') + min(0,profit_cft_tpt[_n-1]) if t>1 & `deprtype'=="sl"
***
by id_e,sort: replace cov_profit_cft=(1+`inflation')*(`p'+`delta')-`depreciation'-min(max(1-`depreciation',0),`depreciation')-`debt_v'*i +QRTC if t==1 & `deprtype'=="sl"
by id_e,sort: replace cov_profit_cft=(1+`inflation')^t*(`p'+`delta')*(1-`delta')^(t-1)-min(max(1-t*`depreciation',0),`depreciation')-`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + QRTC+ min(0,cov_profit_cft[_n-1]) +QRTC if t>1 & `deprtype'=="sl"
la var cov_profit_cft "covered tax of a refundable R"
*top-up tax base (excessl profit)
gen double exprofit_cft=max(0,cov_profit_cft-SBIE)
la var exprofit_cft "Excess profit under R based cash flow tax"
*The top-up tax rate is 15% minus the GloBE effetive tax rate (i.e., covered tax divided by covered income). Note that in the absence of qualified refundable tax credit, then the ETr is similar to the statutory tax rate. Therefore, the top-up rate can be calaucltes as max(0, 15%-statutory tax rate).
gen double covtax_cft=0 // covered tax
by id_e, sort: replace covtax_cft=(`taxrate')*max(0,profit_cft_tpt)-min((`taxrate')*max(0,profit_cft_tpt),NQRTC) if `holiday_v'==0
by id_e, sort: replace covtax_cft=(`taxrate')*max(0,profit_cft_tpt)-min((`taxrate')*max(0,profit_cft_tpt),NQRTC) if t>`holiday_v' & `holiday_v'>0
gen tpr_cft=0
by id_e, sort: replace tpr_cft=max(0,`minrate'-(covtax_cft)/cov_profit_cft) if cov_profit_cft>0 //the top-up tax in each period
la var tpr_cft "Top up tax rate under R based cashflow tax"
*top-up tax amount
by id_e, sort: gen double tpt_cft=tpr_cft*exprofit_cft/(1+rho)^t // top-up tax (discounted value)
by id_e, sort: egen double total_tpt_cft=total(tpt_cft) // The NPV of top-up taxes paid
merge 1:1 id_e t using `cft_pregoble' // This merges the taxes paid before the top-up
drop _merge
by id_e, sort: gen econrent_cft=gamma*(revenue_NPV-1-Tax_cft_NPV-total_tpt_cft)+ `newequity_v'*(gamma-1)+ `debt_v'*gamma*( rho-i)/( rho-`inflation'+`delta'*(1+`inflation'))
by id_e, sort: gen double AETR_CFT=100*((`p'-`r')/(`r'+`delta')-econrent_cft)/(`p'/(`r'+`delta'))
la var tpt_cft "top-up tax (discounted value)"
la var total_tpt_cft "NPV of all top-up taxes paid: under the standard CIT"
drop t i SBIE gamma rho revenue revenue_* A_decline A_straight NQRTC QRTC profit_* covtax_* tpr_* tpt_* total_tpt_* exprofit_* cov_profit_* Tax_* econrent_*
duplicates drop
la var AETR_CFT "AETR of an R-based cash flow tax (%)"
format AETR* %9.02f
} // CFT closed
} // refund or no refund closed
if "`refund'"=="yes" & "`system'"=="ace" {
*****We assume that refundable ACE is a QRTC. Hence considered GloBE income.
*The taxbase for covered tax involves calculting accounting profit excluding the ACE credit (since ACE credit is considered covered income for GloBE purposes).
gen double profit_ace_tpt=0
gen double cov_profit_ace=0
**Declining balance
by id_e, sort: replace profit_ace_tpt=(1+`inflation')*(`p'+`delta')-`depreciation'-`depreciation'*(1-`depreciation') if t==1 & `deprtype'=="db"
by id_e, sort: replace profit_ace_tpt=((1+`inflation')^t)*(`p'+`delta')*(1-`delta')^(t-1)-`depreciation'*(1-`depreciation')^t + min(0,profit_ace_tpt[_n-1]) if t>1 & `deprtype'=="db"
by id_e, sort: replace cov_profit_ace=(1+`inflation')*(`p'+`delta')-`depreciation'-`depreciation'*(1-`depreciation') - `debt_v'*i + (`taxrate')*i*(1-`depreciation') + QRTC if t==1 & `deprtype'=="db"
by id_e, sort: replace cov_profit_ace=((1+`inflation')^t)*(`p'+`delta')*(1-`delta')^(t-1)-`depreciation'*(1-`depreciation')^t - `debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + (`taxrate')*i*(1-`depreciation')^t + QRTC + min(0,cov_profit_ace[_n-1]) if t>1 & `deprtype'=="db"
**Straight line
by id_e, sort: replace profit_ace_tpt=(1+`inflation')*(`p'+`delta')-`depreciation'-min(max(1-`depreciation',0),`depreciation') if t==1 & `deprtype'=="sl"
by id_e, sort: replace profit_ace_tpt=((1+`inflation')^t)*(`p'+`delta')*(1-`delta')^(t-1)-min(max(1-t*`depreciation',0),`depreciation') + min(0,profit_ace[_n-1]) if t>1 & `deprtype'=="sl"
by id_e, sort: replace cov_profit_ace=(1+`inflation')*(`p'+`delta')-`depreciation'-min(max(1-`depreciation',0),`depreciation') - `debt_v'*i + (`taxrate')*i*(1-`depreciation') + QRTC if t==1 & `deprtype'=="sl"
by id_e, sort: replace cov_profit_ace=((1+`inflation')^t)*(`p'+`delta')*(1-`delta')^(t-1)-min(max(1-t*`depreciation',0),`depreciation') - `debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + (`taxrate')*i*max(1-t*`depreciation',0) + QRTC + min(0,cov_profit_ace[_n-1]) if t>1 & `deprtype'=="sl"
gen double exprofit_ace=max(0,cov_profit_ace-SBIE) // Excess profit is GloBe income minus susbtance based income exclusion
gen double covtax_ace=0
by id_e, sort: replace covtax_ace=(`taxrate')*max(0,profit_ace_tpt)-min((`taxrate')*max(0,profit_ace_tpt),NQRTC) if `holiday_v'==0
by id_e, sort: replace covtax_ace=(`taxrate')*max(0,profit_ace_tpt)-min((`taxrate')*max(0,profit_ace_tpt),NQRTC) if t>`holiday_v' & `holiday_v'>0
gen double tpr_ace=0
by id_e, sort: replace tpr_ace=max(0,`minrate'-(covtax_ace)/cov_profit_ace) if cov_profit_ace>0
// Note that the difference between the nominator and denominator is that the denomintor includes the tax credit as an income
by id_e, sort: gen double tpt_ace=tpr_ace*exprofit_ace/(1+i)^t // top-up tax (discounted value)
by id_e, sort: egen double total_tpt_ace=total(tpt_ace)
merge 1:1 id_e t using `ace_pregoble' // This merges the taxes paid before the top-up
drop _merge
by id_e, sort: gen econrent_ace=gamma*(revenue_NPV-1-Tax_ace_NPV-total_tpt_ace)+ `newequity_v'*(gamma-1)+ `debt_v'*gamma*( rho-i)/( rho-`inflation'+`delta'*(1+`inflation'))
by id_e, sort: gen double AETR_ACE=100*((`p'-`r')/(`r'+`delta')-econrent_ace)/(`p'/(`r'+`delta'))
la var tpt_ace "top-up tax (discounted value)"
la var total_tpt_ace "NPV of all top-up taxes paid: under the ACE"
drop t i SBIE gamma rho revenue revenue_* A_decline A_straight NQRTC QRTC profit_* covtax_* tpr_* tpt_* total_tpt_* exprofit_* cov_profit_* Tax_* econrent_*
duplicates drop
la var AETR_ACE "AETR of an ACE system (%)"
format AETR* %9.02f
} // closes refundable ace
if "`refund'"=="no" & "`system'"=="ace" {
*ACE
**We assume that refundable ACE is a NQRTC. Hence considered GloBE income.
*************************
gen double profit_ace_tpt=0
gen double cov_profit_ace=0 //This is the tax base from which SBIE is deducted
*The taxbase for covered tax involves calculting accounting profit including the ACE credit (since non refundable ACE credit is considered a reduction in covered tax for GloBE purposes).
**Declining balance
by id_e, sort: replace profit_ace_tpt=(1+`inflation')*(`p'+`delta')-`depreciation'-`depreciation'*(1-`depreciation') -i*(1-`depreciation') if t==1 & `deprtype'=="db"
by id_e, sort: replace profit_ace_tpt=((1+`inflation')^t)*(`p'+`delta')*(1-`delta')^(t-1)-`depreciation'*(1-`depreciation')^t-i*(1-`depreciation')^t + min(0,profit_ace_tpt[_n-1]) if t>1 & `deprtype'=="db"
***
by id_e, sort: replace cov_profit_ace=(1+`inflation')*(`p'+`delta')-`depreciation'-`depreciation'*(1-`depreciation') - `debt_v'*i + QRTC if t==1 & `deprtype'=="db"
by id_e, sort: replace cov_profit_ace=((1+`inflation')^t)*(`p'+`delta')*(1-`delta')^(t-1)-`depreciation'*(1-`depreciation')^t - `debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + QRTC + min(0,cov_profit_ace[_n-1]) if t>1 & `deprtype'=="db"
**straight line
by id_e, sort: replace profit_ace_tpt=(1+`inflation')*(`p'+`delta')-`depreciation'-min(max(1-`depreciation',0),`depreciation')- `i'*max(1-`depreciation',0) if t==1 & `deprtype'=="sl"
by id_e, sort: replace profit_ace_tpt=((1+`inflation')^t)*(`p'+`delta')*(1-`delta')^(t-1)-min(max(1-t*`depreciation',0),`depreciation')- `i'*max(1-t*`depreciation',0) + min(0,profit_ace_tpt[_n-1]) if t>1 & `deprtype'=="sl"
***
replace cov_profit_ace=(1+`inflation')*(`p'+`delta')-`depreciation'-min(max(1-`depreciation',0),`depreciation') - `debt_v'*`i' + QRTC if t==1 & `deprtype'=="sl"
replace cov_profit_ace`taxrate'=((1+`inflation')^t)*(`p'+`delta')*(1-`delta')^(t-1)-min(max(1-t*`phi',0),`phi') - `debt_v'*`i'*((1+`inflation')*(1-`delta'))^(t-1) + QRTC + min(0,cov_profit_ace[_n-1]) if t>1 & `deprtype'=="sl"
gen double covtax_ace=0
by id_e, sort: replace covtax_ace=(`taxrate')*max(0,profit_ace_tpt)-min((`taxrate')*max(0,profit_ace_tpt),NQRTC) if `holiday_v'==0
by id_e, sort: replace covtax_ace=(`taxrate')*max(0,profit_ace_tpt)-min((`taxrate')*max(0,profit_ace_tpt),NQRTC) if t>`holiday_v' & `holiday_v'>0
gen double tpr_ace=0
by id_e, sort: replace tpr_ace=max(0,`minrate'-(covtax_ace)/cov_profit_ace) if cov_profit_ace>0
gen double exprofit_ace=max(0,cov_profit_ace-SBIE) // Excess profit is GloBe income minus susbtance based income exclusion
by id_e, sort: gen double tpt_ace=tpr_ace*exprofit_ace/(1+i)^t // top-up tax (discounted value)
by id_e, sort: egen double total_tpt_ace=total(tpt_ace)
merge 1:1 id_e t using `ace_pregoble' // This merges the taxes paid before the top-up
drop _merge
by id_e, sort: gen econrent_ace=gamma*(revenue_NPV-1-Tax_ace_NPV-total_tpt_ace)+ `newequity_v'*(gamma-1)+ `debt_v'*gamma*( rho-i)/( rho-`inflation'+`delta'*(1+`inflation'))
by id_e, sort: gen double AETR_ACE=100*((`p'-`r')/(`r'+`delta')-econrent_ace)/(`p'/(`r'+`delta'))
la var tpt_ace "top-up tax (discounted value)"
la var total_tpt_ace "NPV of all top-up taxes paid: under the ACE"
drop t i SBIE gamma rho revenue revenue_* A_decline A_straight NQRTC QRTC profit_* covtax_* tpr_* tpt_* total_tpt_* exprofit_* cov_profit_* Tax_* econrent_*
duplicates drop
la var AETR_ACE "AETR of an ACE system (%)"
format AETR* %9.02f
} // closes norefund ace
format AETR* %9.02f
tempfile aetr
save `aetr', replace
} // closes minimum tax==yes
*=================================================================
*Marginal effective tax rate
*=================================================================
use `generalparameter', clear
if "`minimumtax'"=="no" & "`refund'"=="yes" {
tempfile metr_norefund
save `metr_norefund', replace
*the cost of capital is the economic return that will result in a zero post-tax economic rent.Hence, (p-r)/(r+delta)-Tax_R_NPV=0
**First, the case of a refundable system
***standard CIT
if "`system'"=="cit" {
* Create a temporary file to store the original data
* Initialize necessary variables globally
gen double coc_cit = . // Initialize variable for the cost of capital of a refundable CIT
* Define local parameters
local tolerance = 0.0001 // How close to zero we need to get economic rent
local max_iter = 1000 // Maximum number of iterations
* Get unique IDs
levelsof id_e, local(id_list)
* Create a temporary file to store results
tempfile cit_results
save `cit_results', emptyok // Start with an empty file for results
* Loop through each ID
foreach id in `id_list' {
* Load the original data copy for each ID
use `metr_norefund', clear
* Restrict data to the current id
quietly keep if id == `id'
* Set initial values
local p = `r' // Initial guess for cost of capital
local iter = 0 // Iteration counter
* Initialize ptilde_cit for this specific id
gen double coc_cit = .
* Begin the iterative process
while `iter' < `max_iter' {
* Calculate the economic rent based on the current value of p
gen double revenue=0
replace revenue=0 if t==0 // revenue in period 0
replace revenue=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1) if t>0 // revenue in period t>0
gen double revenue_time=revenue/((1 + rho) ^ t) // discounted value of revenue
egen double revenue_NPV= total(revenue_time)
gen double profit_cit =0
**Declining balance
replace profit_cit =- `depreciation' if t==0 & `deprtype'=="db"
replace profit_cit = (`p' + `delta') * ((1 + `inflation') ^ t) * ((1 - `delta') ^ (t - 1)) - `depreciation'*(1 - `depreciation') ^ t - `debt_v' *i*((1 + `inflation') * (1 - `delta')) ^ (t - 1) if t >= 1 & `deprtype'=="db"
*Straight line
replace profit_cit = - `depreciation' if t==0 & `deprtype'=="sl"
replace profit_cit = (`p' + `delta') * ((1 + `inflation') ^ t) * ((1 - `delta') ^ (t - 1)) - min(max(1 - t *`depreciation', 0), `depreciation') - `debt_v' * i * ((1 + `inflation') * (1 - `delta')) ^ (t - 1) if t >= 1 & `deprtype'=="sl"
gen double Tax_cit=0
replace Tax_cit =(`taxrate') * profit_cit -QRTC-min(max(`taxrate'*profit_cit,0),NQRTC) if `holiday_v'==0
// period by period tax liability (if taxable income is negative, then tax is also negative (i.e., refund))
replace Tax_cit=-QRTC if t<=`holiday_v' & `holiday_v'>0
replace Tax_cit =(`taxrate') * profit_cit -QRTC-min(max(`taxrate'*profit_cit,0),NQRTC) if t>`holiday_v' & `holiday_v'>0
gen double Tax_cit_time = Tax_cit / ((1 + rho) ^ t)
egen double Tax_cit_NPV = total(Tax_cit_time)
gen double econrent_cit=gamma*(revenue_NPV-1-Tax_cit_NPV)+ `newequity_v'*(gamma-1)+ `debt_v'*gamma*( rho-i)/(rho-`inflation'+`delta'*(1+`inflation')) // Econonmic rent. The economic retun that reuslts in zero economic rent is the basis for METR
* Check if economic rent is close enough to zero
if abs(econrent_cit) < `tolerance' {
display "Converged for id=`id': p = " `p'
break
}
* Adjust p based on whether the sum is positive or negative
if abs(econrent_cit)>=0.1 {
local p = `p' - econrent_cit/10 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
if abs(econrent_cit)<0.1 {
local p = `p' - econrent_cit/5 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
* Increment the iteration counter
local iter = `iter' + 1
* Drop variables for the next iteration
drop revenue revenue_time revenue_NPV profit_cit Tax_cit Tax_cit_time Tax_cit_NPV econrent_cit
}
* Display results if maximum iterations reached without converging
if `iter' == `max_iter' {
local p_formatted: display %9.5f `p'
display "Maximum iterations reached without convergence. Last p for id=`id' = " `p_formatted'
}
* Save the converged ptilde_cit for this id
replace coc_cit = `p'
* Calculate METR_CIT for this id
by id, sort: gen METR_CIT = 100 *(coc_cit - `r') / coc_cit
by id, sort: replace coc_cit = 100 * coc_cit
* Append the results for this id to the temporary results file
if id!=1{
append using `cit_results' // Append results for this id
}
save `cit_results', replace // Save the updated results
}
drop t i gamma rho A_decline A_straight SBIE QRTC NQRTC // variables no longer needed
duplicates drop // to keep only one observatio per ID
la var coc_cit "The cost of capital of a CIT"
la var METR_CIT "Marginal effective tax rate of a CIT"
*rename taxrate statutory_tax_rate
format METR* %9.03f
format coc* %9.03f
tempfile cit_results // keeping a local dataset containing the CIT METR
save `cit_results', replace
}
****Cashflow tax
if "`system'"=="cft" {
* Create a temporary file to store the original data
gen double coc_cft = . // Initialize variable for the cost of capital of a non-refundable CIT
* Define local parameters
local tolerance = 0.0001 // How close to zero we need to get economic rent
local max_iter = 1000 // Maximum number of iterations
* Get unique IDs
levelsof id_e, local(id_list)
* Create a temporary file to store results
tempfile cft_results
save `cft_results', emptyok // Start with an empty file for results
* Loop through each ID
foreach id in `id_list' {
* Load the original data copy for each ID
use `metr_norefund', clear
* Restrict data to the current id
quietly keep if id == `id'
* Set initial values
local p = `r' // Initial guess for cost of capital
local iter = 0 // Iteration counter
* Initialize ptilde_cit for this specific id
gen double coc_cft = .
while `iter' < `max_iter' {
* Calculate the economic rent (the difference between the pre-tax value and the tax paid) based on the current value of p
gen double revenue=0
replace revenue=0 if t==0 // revenue in period 0
replace revenue=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1) if t>0 // revenue in period t>0
gen double revenue_time=revenue/((1 + rho) ^ t) // discounted value of revenue
egen double revenue_NPV= total(revenue_time)
gen double profit_cft = -1 if t==0
replace profit_cft = (`p' + `delta') * ((1 + `inflation') ^ t) * ((1 - `delta') ^ (t - 1)) if t >= 1
gen double Tax_cft=0
replace Tax_cft =(`taxrate') * profit_cft -QRTC-min(max(`taxrate'*profit_cft,0),NQRTC) if `holiday_v'==0
// period by period tax liability (if taxable income is negative, then tax is also negative (i.e., refund))
replace Tax_cft=-QRTC if t<=`holiday_v' & `holiday_v'>0
replace Tax_cft =(`taxrate') * profit_cft -QRTC-min(max(`taxrate'*profit_cft,0),NQRTC) if t>`holiday_v' & `holiday_v'>0
gen double Tax_cft_time = Tax_cft/((1 + rho) ^ t) // The discounted value of each peruiod's tax liability
egen double Tax_cft_NPV = total(Tax_cft_time) // NPV of the the sum of taxes paid
gen double econrent_cft=gamma*(revenue_NPV-1-Tax_cft_NPV)+ `newequity_v'*(gamma-1)+ `debt_v'*gamma*( rho-i)/(rho-`inflation'+`delta'*(1+`inflation')) // Econonmic rent. The economic retun that reuslts in zero economic rent is the basis for METR
* Check if economic rent is close enough to zero
*summarize econ_rent, meanonly
if abs(econrent_cft) < `tolerance' {
display "Converged: p`taxrate' = " `p'
break
}
* Adjust p based on whether the sum is positive or negative
if abs(econrent_cft)>=0.1 {
local p = `p' - econrent_cft/10 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
if abs(econrent_cft)<0.1 {
local p = `p' - econrent_cft/5 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
* Increment the iteration counter
local iter = `iter' + 1
* Drop variables for the next iteration
drop revenue revenue_time revenue_NPV profit_cft Tax_cft Tax_cft_time Tax_cft_NPV econrent_cft // to allow for the next iteration
}
* Display results if maximum iterations reached without converging
if `iter' == `max_iter' {
local p_formatted: display %9.5f `p'
display "Maximum iterations reached without convergence. Last p`taxrate' = " `p_formatted'
}
replace coc_cft= `p'
gen double METR_CFT= 100*(coc_cft-`r')/ coc_cft
replace coc_cft=100*coc_cft
if id!=1{
append using `cft_results' // Append results for this id
}
save `cft_results', replace // Save the updated results
}
drop t i gamma rho A_decline A_straight SBIE QRTC NQRTC
duplicates drop
la var coc_cft "The cost of capital of a cashflow tax"
la var METR_CFT "Marginal effective tax rate of a cashflow tax system"
*rename taxrate statutory_tax_rate
format METR* %9.03f
format coc* %9.03f
save `cft_results', replace
}
****Allowance for equity
if "`system'"=="ace" {
* Create a temporary file to store the original data
gen double coc_ace = . // Initialize variable for the cost of capital of a non-refundable CIT
* Define local parameters
local tolerance = 0.0001 // How close to zero we need to get economic rent
local max_iter = 1000 // Maximum number of iterations
* Get unique IDs
levelsof id_e, local(id_list)
* Create a temporary file to store results
tempfile ace_results
save `ace_results', emptyok // Start with an empty file for results
* Loop through each ID
foreach id in `id_list' {
* Load the original data copy for each ID
use `metr_norefund', clear
* Restrict data to the current id
quietly keep if id == `id'
* Set initial values
local p = `r' // Initial guess for cost of capital
local iter = 0 // Iteration counter
* Initialize ptilde_cit for this specific id
gen double coc_ace = .
* Begin the iterative process
while `iter' < `max_iter' {
* Calculate the economic rent (the difference between the pre-tax value and the tax paid) based on the current value of p
gen double revenue=0
replace revenue=0 if t==0 // revenue in period 0
replace revenue=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1) if t>0 // revenue in period t>0
gen double revenue_time=revenue/((1 + rho) ^ t) // discounted value of revenue
egen double revenue_NPV= total(revenue_time)
gen double profit_ace=0
**Declining balance
replace profit_ace=-`depreciation' if t==0 & `deprtype'=="db"
replace profit_ace=(`p'+`delta')*((1+`inflation')^t)*((1-`delta')^(t-1))-`depreciation'*(1-`depreciation')^t-i*(1-`depreciation')^t if t>=1 & `deprtype'=="db"
la var profit_ace "profit under refundable ACE"
**Straight line
replace profit_ace=-`depreciation' if t==0 & `deprtype'=="sl"
replace profit_ace=(`p'+`delta')*((1+`inflation')^t)*((1-`delta')^(t-1))-min(max(1-t*`depreciation',0),`depreciation')-i*max(1-t*`depreciation',0) if t>=1 & `deprtype'=="sl"
la var profit_ace "profit under non-refundable ACE"
gen double Tax_ace=0
replace Tax_ace=(`taxrate') * profit_ace -QRTC-min(max(`taxrate'*profit_ace,0),NQRTC) if `holiday_v'==0
// period by period tax liability (if taxable income is negative, then tax is also negative (i.e., refund))
replace Tax_ace=-QRTC if t<=`holiday_v' & `holiday_v'>0
replace Tax_ace=(`taxrate') * profit_ace -QRTC-min(max(`taxrate'*profit_ace,0),NQRTC) if t>`holiday_v' & `holiday_v'>0
gen double Tax_ace_time= Tax_ace/((1 + i) ^ t) // The discounted value of each peruiod's tax liability
egen double Tax_ace_NPV = total(Tax_ace_time) // NPV of the the sum of taxes paid
gen double econrent_ace=gamma*(revenue_NPV-1-Tax_ace_NPV)+ `newequity_v'*(gamma-1)+ `debt_v'*gamma*( rho-i)/(rho-`inflation'+`delta'*(1+`inflation')) // Econonmic rent. The economic retun that reuslts in zero economic rent is the basis for METR
*summarize econ_rent, meanonly
if abs(econrent_ace) < `tolerance' {
display "Converged: p`taxrate' = " `p'
break
}
* Adjust p based on whether the sum is positive or negative
if abs(econrent_ace)>=0.1 {
local p = `p' - econrent_ace/10 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
if abs(econrent_ace)<0.1 {
local p = `p' - econrent_ace/5 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
* Increment the iteration counter
local iter = `iter' + 1
* Drop variables for the next iteration
drop revenue revenue_time revenue_NPV profit_ace Tax_ace Tax_ace_time Tax_ace_NPV econrent_ace // to allow for the next iteration
}
* Display results if maximum iterations reached without converging
if `iter' == `max_iter' {
local p_formatted: display %9.5f `p'
display "Maximum iterations reached without convergence. Last p`taxrate' = " `p_formatted'
}
*replace taxrate_s = `taxrate' in `n'
replace coc_ace = `p'
gen double METR_ACE= 100*(coc_ace-`r')/ coc_ace
replace coc_ace=100*coc_ace
if id!=1{
append using `ace_results' // Append results for this id
}
save `ace_results', replace // Save the updated results
}
drop t i gamma rho A_decline A_straight SBIE QRTC NQRTC
duplicates drop
la var coc_ace "The cost of capital of an ACE system"
la var METR_ACE "Marginal tax rate of an ACE system"
format METR* %9.03f
format coc* %9.03f
save `ace_results', replace
}
} // closes minimumtax==no & refund==yes
if "`minimumtax'"=="no" & "`refund'"=="no" {
****standard CIT
* Create a temporary file to store the original data
if "`system'"=="cit" {
tempfile metr_norefund
save `metr_norefund', replace
* Initialize necessary variables globally
gen double coc_cit = . // Initialize variable for the cost of capital of a non-refundable CIT
* Define local parameters
local tolerance = 0.0001 // How close to zero we need to get economic rent
local max_iter = 1000 // Maximum number of iterations
* Get unique IDs
levelsof id_e, local(id_list)
* Create a temporary file to store results
tempfile cit_results
save `cit_results', emptyok // Start with an empty file for results
* Loop through each ID
foreach id in `id_list' {
* Load the original data copy for each ID
use `metr_norefund', clear
* Restrict data to the current id
quietly keep if id == `id'
* Set initial values
local p = `r' // Initial guess for cost of capital
local iter = 0 // Iteration counter
* Initialize ptilde_cit for this specific id
gen double coc_cit = .
* Begin the iterative process
while `iter' < `max_iter' {
* Calculate the economic rent based on the current value of p
gen double revenue=0
replace revenue=0 if t==0 // revenue in period 0
replace revenue=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1) if t>0 // revenue in period t>0
gen double revenue_time=revenue/((1 + rho) ^ t) // discounted value of revenue
egen double revenue_NPV= total(revenue_time)
gen double profit_cit = 0
**Declining balance
replace profit_cit = (`p' + `delta') * (1 + `inflation') - `depreciation' - `depreciation' * (1 - `depreciation') - `debt_v' * i if t == 1 & `deprtype'=="db"
replace profit_cit = (`p' + `delta') * ((1 + `inflation') ^ t) * ((1 - `delta') ^ (t - 1)) - `depreciation' * (1 - `depreciation') ^ t - `debt_v' * i * ((1 + `inflation') * (1 - `delta')) ^ (t - 1) + min(0, profit_cit[_n-1]) if t > 1 & `deprtype'=="db"
**Straight line
replace profit_cit = (`p' + `delta') * (1 + `inflation') - `depreciation' - min(max(1 - `depreciation', 0), `depreciation') - `debt_v' * i if t == 1 & `deprtype'=="sl"
replace profit_cit = (`p' + `delta') * ((1 + `inflation') ^ t) * ((1 - `delta') ^ (t - 1)) - min(max(1 - t * `depreciation', 0), `depreciation') - `debt_v'*i* ((1 + `inflation') * (1 - `delta')) ^ (t - 1) + min(0, profit_cit[_n-1]) if t > 1 & `deprtype'=="sl"
gen double Tax_cit=0
replace Tax_cit =(`taxrate') * max(profit_cit,0) -QRTC-min(max(`taxrate'*profit_cit,0),NQRTC) if `holiday_v'==0
// period by period tax liability (if taxable income is negative, then tax is zero(i.e., no-refund))
replace Tax_cit=-QRTC if t<=`holiday_v' & `holiday_v'>0
replace Tax_cit =(`taxrate') * max(profit_cit,0) -QRTC-min(max(`taxrate'*profit_cit,0),NQRTC) if t>`holiday_v' & `holiday_v'>0
gen double Tax_cit_time = Tax_cit / ((1 + rho) ^ t)
egen double Tax_cit_NPV = total(Tax_cit_time)
gen double econrent_cit=gamma*(revenue_NPV-1-Tax_cit_NPV)+ `newequity_v'*(gamma-1)+ `debt_v'*gamma*(rho-i)/(rho-`inflation'+`delta'*(1+`inflation')) // Econonmic rent. The economic retun that reuslts in zero economic rent is the basis for METR
* Check if economic rent is close enough to zero
if abs(econrent_cit) < `tolerance' {
display "Converged for id=`id': p = " `p'
break
}
* Adjust p based on whether the sum is positive or negative
if abs(econrent_cit)>=0.1 {
local p = `p' - econrent_cit/10 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
if abs(econrent_cit)<0.1 {
local p = `p' - econrent_cit/5 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
* Increment the iteration counter
local iter = `iter' + 1
* Drop variables for the next iteration
drop revenue revenue_time revenue_NPV profit_cit Tax_cit Tax_cit_time Tax_cit_NPV econrent_cit
}
* Display results if maximum iterations reached without converging
if `iter' == `max_iter' {
local p_formatted: display %9.5f `p'
display "Maximum iterations reached without convergence. Last p for id=`id' = " `p_formatted'
}
* Save the converged ptilde_cit for this id
replace coc_cit = `p'
* Calculate METR_CIT for this id
by id, sort: gen METR_CIT = 100 * (coc_cit - `r') / coc_cit
by id, sort: replace coc_cit = 100 * coc_cit
* Append the results for this id to the temporary results file
if id!=1{
append using `cit_results' // Append results for this id
}
save `cit_results', replace // Save the updated results
}
drop t i gamma rho A_decline A_straight SBIE QRTC NQRTC // variables no longer needed
duplicates drop // to keep only one observatio per ID
la var coc_cit "The cost of capital of a CIT"
la var METR_CIT "Marginal effective tax rate of a CIT"
*rename taxrate statutory_tax_rate
format METR* %9.03f
format coc* %9.03f
tempfile cit_results // keeping a local dataset containing the CIT METR
save `cit_results', replace
}
****Cashflow tax
if "`system'"=="cft" {
tempfile metr_norefund
save `metr_norefund', replace
gen double coc_cft = . // Initialize variable for the cost of capital of a non-refundable CIT
* Define local parameters
local tolerance = 0.0001 // How close to zero we need to get economic rent
local max_iter = 1000 // Maximum number of iterations
* Get unique IDs
levelsof id_e, local(id_list)
* Create a temporary file to store results
tempfile cft_results
save `cft_results', emptyok // Start with an empty file for results
* Loop through each ID
foreach id in `id_list' {
* Load the original data copy for each ID
use `metr_norefund', clear
* Restrict data to the current id
quietly keep if id == `id'
* Set initial values
local p = `r' // Initial guess for cost of capital
local iter = 0 // Iteration counter
* Initialize ptilde_cit for this specific id
gen double coc_cft = .
while `iter' < `max_iter' {
gen double revenue=0
replace revenue=0 if t==0 // revenue in period 0
replace revenue=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1) if t>0 // revenue in period t>0
gen double revenue_time=revenue/((1 + rho) ^ t) // discounted value of revenue
egen double revenue_NPV= total(revenue_time)
* Calculate the economic rent (the difference between the pre-tax value and the tax paid) based on the current value of p
gen double profit_cft = 0
replace profit_cft = (`p' + `delta') * (1 + `inflation') - 1 if t == 1 // -1 is to account for the loss carried forward from period 0
replace profit_cft = (`p' + `delta') * ((1 + `inflation') ^ t) * ((1 - `delta') ^ (t - 1)) + min(0, profit_cft[_n-1]) if t > 1
gen double Tax_cft=0
replace Tax_cft =max(0, `taxrate' * profit_cft ) -QRTC-min(max(`taxrate'*profit_cft,0),NQRTC) if `holiday_v'==0
// period by period tax liability (if taxable income is negative, then tax is zero(i.e., no-refund))
replace Tax_cft=-QRTC if t<=`holiday_v' & `holiday_v'>0
replace Tax_cft =max(0, `taxrate' * profit_cft ) -QRTC-min(max(`taxrate'*profit_cft,0),NQRTC) if t>`holiday_v' & `holiday_v'>0
gen double Tax_cft_time = Tax_cft/((1 + i) ^ t) // The discounted value of each peruiod's tax liability
egen double Tax_cft_NPV = total(Tax_cft_time) // NPV of the the sum of taxes paid
gen double econrent_cft=gamma*(revenue_NPV-1-Tax_cft_NPV)+ `newequity_v'*(gamma-1)+ `debt_v'*gamma*( rho-i)/(rho-`inflation'+`delta'*(1+`inflation')) // Econonmic rent. The economic retun that reuslts in zero economic rent is the basis for METR
*summarize econ_rent, meanonly
if abs(econrent_cft) < `tolerance' {
display "Converged: p`taxrate' = " `p'
break
}
* Adjust p based on whether the sum is positive or negative
if abs(econrent_cft)>=0.1 {
local p = `p' - econrent_cft/10 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
if abs(econrent_cft)<0.1 {
local p = `p' - econrent_cft/5 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
* Increment the iteration counter
local iter = `iter' + 1
* Drop variables for the next iteration
drop revenue revenue_time revenue_NPV profit_cft Tax_cft Tax_cft_time Tax_cft_NPV econrent_cft // to allow for the next iteration
}
* Display results if maximum iterations reached without converging
if `iter' == `max_iter' {
local p_formatted: display %9.5f `p'
display "Maximum iterations reached without convergence. Last p`taxrate' = " `p_formatted'
}
replace coc_cft= `p'
gen double METR_CFT= 100*(coc_cft-`r')/ coc_cft
replace coc_cft=100*coc_cft
if id!=1{
append using `cft_results' // Append results for this id
}
save `cft_results', replace // Save the updated results
}
drop t i gamma rho A_decline A_straight SBIE QRTC NQRTC
duplicates drop
la var coc_cft "The cost of capital of a cashflow tax"
la var METR_CFT "Marginal effective tax rate of a cashflow tax system"
*rename taxrate statutory_tax_rate
format METR* %9.03f
format coc* %9.03f
tempfile cft_results
save `cft_results', replace
}
****Allowance for equity
if "`system'"=="ace" {
tempfile metr_norefund
save `metr_norefund', replace
* Create a temporary file to store the original data
******************Allowance for equity
gen double coc_ace = . // Initialize variable for the cost of capital of a non-refundable CIT
* Define local parameters
local tolerance = 0.0001 // How close to zero we need to get economic rent
local max_iter = 1000 // Maximum number of iterations
* Get unique IDs
levelsof id_e, local(id_list)
* Create a temporary file to store results
tempfile ace_results
save `ace_results', emptyok // Start with an empty file for results
* Loop through each ID
foreach id in `id_list' {
* Load the original data copy for each ID
use `metr_norefund', clear
* Restrict data to the current id
quietly keep if id == `id'
* Set initial values
local p = `r' // Initial guess for cost of capital
local iter = 0 // Iteration counter
* Initialize ptilde_cit for this specific id
gen double coc_ace = .
* Begin the iterative process
while `iter' < `max_iter' {
gen double revenue=0
replace revenue=0 if t==0 // revenue in period 0
replace revenue=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1) if t>0 // revenue in period t>0
gen double revenue_time=revenue/((1 + rho) ^ t) // discounted value of revenue
egen double revenue_NPV= total(revenue_time)
* Calculate the economic rent (the difference between the pre-tax value and the tax paid) based on the current value of p
gen double profit_ace=0
**Declining balance
replace profit_ace=(1+`inflation')*(`p'+`delta')-`depreciation'-`depreciation'*(1-`depreciation')-i*(1-`depreciation') if t==1 & `deprtype'=="db"
// i*(1-phi) is the allowance for corporate equity
replace profit_ace=(`p'+`delta')*((1+`inflation')^t)*((1-`delta')^(t-1))-`depreciation'*(1-`depreciation')^t-i*(1-`depreciation')^t + min(0,profit_ace[_n-1]) if t>1 & `deprtype'=="db"
la var profit_ace "profit under non-refundable ACE and declining balance depreciation"
**Straight line
replace profit_ace=(1+`inflation')*(`p'+`delta')-`depreciation'-min(max(1-`depreciation',0),`depreciation')-i*max(1-`depreciation',0) if t==1 & `deprtype'=="sl"
// i*(1-phi) is the allowance for corporate equity
replace profit_ace=(`p'+`delta')*((1+`inflation')^t)*((1-`delta')^(t-1))-min(max(1-t*`depreciation',0),`depreciation')-i*max(1-t*`depreciation',0) + min(0,profit_ace[_n-1]) if t>1 & `deprtype'=="sl"
la var profit_ace "profit under non-refundable ACE and declining balance depreciation"
gen double Tax_ace=0
replace Tax_ace=max(0, `taxrate' * profit_ace ) -QRTC-min(max(`taxrate'*profit_ace,0),NQRTC) if `holiday_v'==0
// period by period tax liability (if taxable income is negative, then tax is zero(i.e., no-refund))
replace Tax_ace=-QRTC if t<=`holiday_v' & `holiday_v'>0
replace Tax_ace=max(0, `taxrate' * profit_ace ) -QRTC-min(max(`taxrate'*profit_ace,0),NQRTC) if t>`holiday_v' & `holiday_v'>0
gen double Tax_ace_time= Tax_ace/((1 + i) ^ t) // The discounted value of each peruiod's tax liability
egen double Tax_ace_NPV = total(Tax_ace_time) // NPV of the the sum of taxes paid
gen double econrent_ace=gamma*(revenue_NPV-1-Tax_ace_NPV)+ `newequity_v'*(gamma-1)+ `debt_v'*gamma*( rho-i)/(rho-`inflation'+`delta'*(1+`inflation')) // Econonmic rent. The economic retun that reuslts in zero economic rent is the basis for METR
* Check if economic rent is close enough to zero
*summarize econ_rent, meanonly
if abs(econrent_ace) < `tolerance' {
display "Converged: p`taxrate' = " `p'
break
}
* Adjust p based on whether the sum is positive or negative
if abs(econrent_ace)>=0.1 {
local p = `p' - econrent_ace/10 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
if abs(econrent_ace)<0.1 {
local p = `p' - econrent_ace/5 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
* Increment the iteration counter
local iter = `iter' + 1
* Drop variables for the next iteration
drop revenue revenue_time revenue_NPV profit_ace Tax_ace Tax_ace_time Tax_ace_NPV econrent_ace // to allow for the next iteration
}
* Display results if maximum iterations reached without converging
if `iter' == `max_iter' {
local p_formatted: display %9.5f `p'
display "Maximum iterations reached without convergence. Last p`taxrate' = " `p_formatted'
}
*replace taxrate_s = `taxrate' in `n'
replace coc_ace = `p'
gen double METR_ACE= 100*(coc_ace-`r')/ coc_ace
replace coc_ace=100*coc_ace
if id!=1{
append using `ace_results' // Append results for this id
}
save `ace_results', replace // Save the updated results
}
drop t i gamma rho A_decline A_straight SBIE QRTC NQRTC
duplicates drop
la var coc_ace "The cost of capital of an ACE system"
la var METR_ACE "Marginal tax rate of an ACE system"
*rename taxrate statutory_tax_rate
format METR* %9.03f
format coc* %9.03f
save `ace_results', replace
}
} // closing the minimumtax==no and refund==no METR
*===================================================================================
***Marginal Effective Tax rate including top-up.
*===================================================================================
if "`minimumtax'"=="yes" & "`refund'"=="yes" {
***Standard CIT
if "`system'"=="cit" {
* Create a temporary file to store the original data
tempfile metr_norefund
save `metr_norefund', replace
* Initialize necessary variables globally
gen double coc_cit = . // Initialize variable for the cost of capital of a non-refundable CIT
* Define local parameters
local tolerance = 0.0001 // How close to zero we need to get economic rent
local max_iter = 1000 // Maximum number of iterations
* Get unique IDs
levelsof id_e, local(id_list)
* Create a temporary file to store results
tempfile cit_results
save `cit_results', emptyok // Start with an empty file for results
* Loop through each ID
foreach id in `id_list' {
* Load the original data copy for each ID
use `metr_norefund', clear
* Restrict data to the current id
quietly keep if id == `id'
* Set initial values
local p = `r' // Initial guess for cost of capital
local iter = 0 // Iteration counter
* Initialize ptilde_cit for this specific id
gen double coc_cit = .
* Begin the iterative process
while `iter' < `max_iter' {
* Calculate the economic rent (the difference between the pre-tax value and the tax paid) based on the current value of p
/*=========================
First, the pre-topup tax (we use the same for debt and equity finance becasue they are equivalent)
=========================*/
gen double revenue=0
replace revenue=0 if t==0 // revenue in period 0
replace revenue=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1) if t>0 // revenue in period t>0
gen double revenue_time=revenue/((1 + rho) ^ t) // discounted value of revenue
egen double revenue_NPV= total(revenue_time)
gen double profit_cit=-`depreciation' if t==0 //taxable income in period 0
gen double profit_cit_tpt=0 if t==0 // accounting profit before tax credit
gen double cov_profit_cit=0 if t==0
**Declining balance
replace profit_cit=(`p'+`delta')*((1+`inflation')^t)*((1-`delta')^(t-1))-`depreciation'*(1-`depreciation')^t-`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) if t>0 & `deprtype'=="db"
la var profit_cit "profit under a refundable CIT"
replace profit_cit_tpt=(`p'+`delta')*(1+`inflation')-`depreciation'-`depreciation'*(1-`depreciation')-`debt_v'*i if t==1 & `deprtype'=="db"
replace profit_cit_tpt=(`p'+`delta')*((1+`inflation')^t)*((1-`delta')^(t-1))-`depreciation'*(1-`depreciation')^t-`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + min(0,profit_cit_tpt[_n-1]) if t>1 & `deprtype'=="db"
** Globe income (covered taxable income) is standard profit plus the tax credit
replace cov_profit_cit=(`p'+`delta')*(1+`inflation')-`depreciation'-`depreciation'*(1-`depreciation')-`debt_v'*i + QRTC if t==1 & `deprtype'=="db"
replace cov_profit_cit=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-`depreciation'*(1-`depreciation')^t -`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + min(0,cov_profit_cit[_n-1]) + QRTC if t>1 & `deprtype'=="db"
la var cov_profit_cit "covered tax of a standard CIT"
**Straight line
replace profit_cit=(`p'+`delta')*((1+`inflation')^t)*((1-`delta')^(t-1))-min(max(1-t*`depreciation',0),`depreciation')-`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) if t>0 & `deprtype'=="sl"
la var profit_cit "profit under a standard CIT"
****
replace profit_cit_tpt=(`p'+`delta')*(1+`inflation')-`depreciation'-min(max(1-`depreciation',0),`depreciation')-`debt_v'*i if t==1 & `deprtype'=="sl"
replace profit_cit_tpt=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-min(max(1-t*`depreciation',0),`depreciation') -`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + min(0,profit_cit_tpt[_n-1]) if t>1 & `deprtype'=="sl"
** Globe income (covered taxable income) is standard profit plus the tax credit
replace cov_profit_cit=(`p'+`delta')*(1+`inflation')-`depreciation'-min(max(1-`depreciation',0),`depreciation')-`debt_v'*i + QRTC if t==1 & `deprtype'=="sl"
replace cov_profit_cit=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-min(max(1-t*`depreciation',0),`depreciation')-`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + min(0,cov_profit_cit[_n-1]) + QRTC if t>1 & `deprtype'=="sl"
la var cov_profit_cit "covered tax of a standard CIT"
*First, the domestic tax
gen double Tax_cit=0
replace Tax_cit=`taxrate' * profit_cit -QRTC-min(max(`taxrate'*profit_cit,0),NQRTC) if `holiday_v'==0
// period by period tax liability (if taxable income is negative, then tax is zero(i.e., refund))
replace Tax_cit=-QRTC if t<=`holiday_v' & `holiday_v'>0
replace Tax_cit=`taxrate' * profit_cit -QRTC-min(max(`taxrate'*profit_cit,0),NQRTC) if t>`holiday_v'
gen double Tax_cit_time = Tax_cit/((1 + rho) ^ t) // The discounted value of each period's tax liability
egen double Tax_cit_NPV = total(Tax_cit_time) // NPV of the the sum of taxes paid
*Second, the top-up tax part
gen double exprofit_cit=max(0,cov_profit_cit-SBIE)
la var exprofit_cit "Excess profit under standard CIT"
gen covtax_cit=0 // covered tax
replace covtax_cit=(`taxrate')*max(0,profit_cit_tpt)-min((`taxrate')*max(0,profit_cit_tpt),NQRTC) if `holiday_v'==0
replace covtax_cit=(`taxrate')*max(0,profit_cit_tpt)-min((`taxrate')*max(0,profit_cit_tpt),NQRTC) if t>`holiday_v' & `holiday_v'>0
gen double tpr_cit=max(0,`minrate'-(covtax_cit)/cov_profit_cit) if cov_profit_cit>0 //the top-up tax in each period for each value of the tax rate
la var tpr_cit "Top up tax rate under stanadrd CIT"
gen double tpt_cit=tpr_cit*exprofit_cit/((1+rho)^t) // the discounted value of the top-up tax paid each period
egen total_tpt_cit=total(tpt_cit)
gen double econrent_cit=gamma*(revenue_NPV-1-Tax_cit_NPV-total_tpt_cit)+ `newequity_v'*(gamma-1)+ `debt_v'*gamma*(rho-i)/(rho-`inflation'+`delta'*(1+`inflation')) // Econonmic rent. The economic retun that reuslts in zero economic rent is the basis for METR
/*=========================
Third, define economic rent and check if economic rent is close enough to zero
=========================*/
if abs(econrent_cit) < `tolerance' {
display "Converged: p`taxrate' = " `p'
break
}
* Adjust p based on whether the sum is positive or negative
if abs(econrent_cit)>=0.1 {
local p = `p' - econrent_cit/10 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
if abs(econrent_cit)<0.1 {
local p = `p' - econrent_cit/5 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
* Increment the iteration counter
local iter = `iter' + 1
* Drop variables for the next iteration
drop revenue revenue_time revenue_NPV profit_cit Tax_cit Tax_cit_time Tax_cit_NPV profit_cit_tpt cov_profit_cit exprofit_cit covtax_cit tpr_cit tpt_cit total_tpt_cit econrent_cit // to allow for the next iteration
} // closing the iteration
* Display results if maximum iterations reached without converging
if `iter' == `max_iter' {
local p_formatted: display %9.5f `p'
display "Maximum iterations reached without convergence. Last p`taxrate' = " `p_formatted'
}
replace coc_cit= `p'
gen double METR_CIT= 100*(coc_cit-`r')/ coc_cit
replace coc_cit= 100*coc_cit
if id!=1{
append using `cit_results' // Append results for this id
}
save `cit_results', replace // Save the updated results
}
drop t i gamma rho A_decline A_straight SBIE QRTC NQRTC // variables no longer needed
duplicates drop // to keep only one observatio per ID
tempfile cit_results // keeping a local dataset containing the CIT METR
save `cit_results', replace
la var coc_cit "The cost of capital of a CIT"
la var METR_CIT "Marginal effective tax rate of a CIT"
*rename taxrate statutory_tax_rate
format METR* %9.03f
format coc* %9.03f
}
***cashflow tax
if "`system'"=="cft" {
tempfile metr_norefund
save `metr_norefund', replace
gen double coc_cft = . // Initialize variable for the cost of capital of a non-refundable CIT
* Define local parameters
local tolerance = 0.0001 // How close to zero we need to get economic rent
local max_iter = 1000 // Maximum number of iterations
* Get unique IDs
levelsof id_e, local(id_list)
* Create a temporary file to store results
tempfile cft_results
save `cft_results', emptyok // Start with an empty file for results
* Loop through each ID
foreach id in `id_list' {
* Load the original data copy for each ID
use `metr_norefund', clear
* Restrict data to the current id
quietly keep if id == `id'
* Set initial values
local p = `r' // Initial guess for cost of capital
local iter = 0 // Iteration counter
* Initialize ptilde_cit for this specific id
gen double coc_cft = .
* Begin the iterative process
while `iter' < `max_iter' {
* Calculate the economic rent (the difference between the pre-tax value and the tax paid) based on the current value of p
/*=========================
First, the pre-topup tax
=========================*/
gen double revenue=0
replace revenue=0 if t==0 // revenue in period 0
replace revenue=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1) if t>0 // revenue in period t>0
gen double revenue_time=revenue/((1 + rho) ^ t) // discounted value of revenue
egen double revenue_NPV= total(revenue_time)
gen double profit_cft=0
replace profit_cft=-1 if t==0 // period 0 taxable income
replace profit_cft=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1) if t>=1
la var profit_cft "profit under a refundable cahsflow tax"
gen double Tax_cft=0
replace Tax_cft=`taxrate' * profit_cft -QRTC-min(max(`taxrate'*profit_cft,0),NQRTC) if `holiday_v'==0
// period by period tax liability (if taxable income is negative, then tax is zero(i.e., refund))
replace Tax_cft=-QRTC if t<=`holiday_v' & `holiday_v'>0
replace Tax_cft=`taxrate' * profit_cft -QRTC-min(max(`taxrate'*profit_cft,0),NQRTC) if t>`holiday_v' & `holiday_v'>0
gen double Tax_cft_time= Tax_cft/((1 + rho) ^ t) // The discounted value of each peruiod's tax liability
egen double Tax_cft_NPV= total(Tax_cft_time) // NPV of the the sum of taxes paid
/*=========================
Second, the top-up tax
=========================*/
gen double profit_cft_tpt=0 if t==0 // covered tax for GloBE purposes. Since immediate expensing is a timing issue, the covered tax and top-up rate look similar to the case of a standard CIT financed with equity
gen double cov_profit_cft=0 if t==0 // covered tax for GloBE purposes. Since immediate expensing is a timing issue, the covered tax and top-up rate look similar to the case of a standard CIT financed with equity
**declining balance
replace profit_cft_tpt=(1+`inflation')*(`p'+`delta')-`depreciation'-`depreciation'*(1-`depreciation') if t==1 & `deprtype'=="db"
replace profit_cft_tpt=(1+`inflation')^t*(`p'+`delta')*(1-`delta')^(t-1)-`depreciation'*(1-`depreciation')^t + min(0,profit_cft_tpt[_n-1]) if t>1 & `deprtype'=="db"
la var profit_cft_tpt "the profit base for the covered tax"
replace cov_profit_cft=(1+`inflation')*(`p'+`delta')-`depreciation'-`depreciation'*(1-`depreciation')-`debt_v'*i + QRTC if t==1 & `deprtype'=="db"
replace cov_profit_cft=(1+`inflation')^t*(`p'+`delta')*(1-`delta')^(t-1)-`depreciation'*(1-`depreciation')^t -`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + min(0,cov_profit_cft[_n-1]) + QRTC if t>1 & `deprtype'=="db"
la var cov_profit_cft "covered tax of a cashflow tax under GlOBE: declining balance depreciation"
**Straight line
replace profit_cft_tpt=(1+`inflation')*(`p'+`delta')-`depreciation'-min(max(1-`depreciation',0),`depreciation') if t==1 & `deprtype'=="sl"
replace profit_cft_tpt=((1+`inflation')^t)*(`p'+`delta')*(1-`delta')^(t-1)-min(max(1-t*`depreciation',0),`depreciation') + min(0,profit_cft_tpt[_n-1]) if t>1 & `deprtype'=="sl"
la var profit_cft_tpt "the profit base for the covered tax"
replace cov_profit_cft=(`p'+`delta')*(1+`inflation')-`depreciation'-min(max(1-`depreciation',0),`depreciation')-`debt_v'*i + QRTC if t==1 & `deprtype'=="sl"
replace cov_profit_cft=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-min(max(1-t*`depreciation',0),`depreciation') -`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + min(0,cov_profit_cft[_n-1]) + QRTC if t>1 & `deprtype'=="sl"
la var cov_profit_cft "covered tax of a cashflow tax under GlOBE: declining balance depreciation"
gen double exprofit_cft=max(0,cov_profit_cft-SBIE)
la var exprofit_cft "Excess profit under refundable cashfolow tax: GloBE"
gen covtax_cft=0 // covered tax
replace covtax_cft=(`taxrate')*max(0,profit_cft_tpt)-min((`taxrate')*max(0,profit_cft_tpt),NQRTC) if `holiday_v'==0
replace covtax_cft=(`taxrate')*max(0,profit_cft_tpt)-min((`taxrate')*max(0,profit_cft_tpt),NQRTC) if t>`holiday_v' & `holiday_v'>0
gen double tpr_cft=max(0,`minrate'-(covtax_cft)/cov_profit_cft) if cov_profit_cft>0 //the top-up tax in each period for each value of the tax rate
la var tpr_cft "Top up tax rate under R based cashflow tax"
gen double tpt_cft=tpr_cft*exprofit_cft/((1+rho)^t) // top-up tax (discounted value)
egen double total_tpt_cft=total(tpt_cft)
gen double econrent_cft=gamma*(revenue_NPV-1-Tax_cft_NPV-total_tpt_cft) + `newequity_v'*(gamma-1)+ `debt_v'*gamma*(rho-i)/(rho-`inflation'+`delta'*(1+`inflation')) // Econonmic rent. The economic retun that reuslts in zero economic rent is the basis for METR
/*=========================
Third, define economic rent and check if economic rent is close enough to zero
=========================*/
if abs(econrent_cft) < `tolerance' {
display "Converged: p`taxrate' = " `p'
break
}
* Adjust p based on whether the sum is positive or negative
if abs(econrent_cft)>=0.1 {
local p = `p' - econrent_cft/10 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
if abs(econrent_cft)<0.1 {
local p = `p' - econrent_cft/5 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
* Increment the iteration counter
local iter = `iter' + 1
* Drop variables for the next iteration
drop revenue revenue_time revenue_NPV profit_cft profit_cft_tpt Tax_cft Tax_cft_time Tax_cft_NPV cov_profit_cft exprofit_cft covtax_cft tpr_cft tpt_cft total_tpt_cft econrent_cft // to allow for the next iteration
} // closing the iternation
* Display results if maximum iterations reached without converging
if `iter' == `max_iter' {
local p_formatted: display %9.5f `p'
display "Maximum iterations reached without convergence. Last p`taxrate' = " `p_formatted'
}
replace coc_cft= `p'
gen double METR_CFT= 100*(coc_cft-`r')/ coc_cft
replace coc_cft=100*coc_cft
if id!=1{
append using `cft_results' // Append results for this id
}
save `cft_results', replace // Save the updated results
}
drop t i gamma rho A_decline A_straight SBIE QRTC NQRTC
duplicates drop
save `cft_results', replace
la var coc_cft "The cost of capital of a cashflow tax"
la var METR_CFT "Marginal effective tax rate of a cashflow tax system"
*rename taxrate statutory_tax_rate
format METR* %9.03f
format coc* %9.03f
}
***ACE
if "`system'"=="ace" {
tempfile metr_norefund
save `metr_norefund', replace
gen double coc_ace = . // Initialize variable for the cost of capital of a non-refundable CIT
* Define local parameters
local tolerance = 0.0001 // How close to zero we need to get economic rent
local max_iter = 1000 // Maximum number of iterations
* Get unique IDs
levelsof id_e, local(id_list)
* Create a temporary file to store results
tempfile ace_results
save `ace_results', emptyok // Start with an empty file for results
* Loop through each ID
foreach id in `id_list' {
* Load the original data copy for each ID
use `metr_norefund', clear
* Restrict data to the current id
quietly keep if id == `id'
* Set initial values
local p = `r' // Initial guess for cost of capital
local iter = 0 // Iteration counter
* Initialize ptilde_cit for this specific id
gen double coc_ace = .
* Begin the iterative process
while `iter' < `max_iter' {
* Calculate the economic rent (the difference between the pre-tax value and the tax paid) based on the current value of p
/*=========================
First, the pre-topup tax (we use the same for debt and equity finance becasue they are equivalent)
=========================*/
gen double revenue=0
replace revenue=0 if t==0 // revenue in period 0
replace revenue=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1) if t>0 // revenue in period t>0
gen double revenue_time=revenue/((1 + rho) ^ t) // discounted value of revenue
egen double revenue_NPV= total(revenue_time)
gen double profit_ace=-`depreciation' if t==0 //taxable income in period 0
gen double profit_ace_tpt=0 if t==0 // accounting profit before tax credit
gen double cov_profit_ace=0 if t==0
**Declining balance
replace profit_ace=(`p'+`delta')*((1+`inflation')^t)*((1-`delta')^(t-1))-`depreciation'*(1-`depreciation')^t-i*(1-`depreciation')^t if t>=1 & `deprtype'=="db"
la var profit_ace "profit under a refundable ACE: declining balance depreciation"
****
replace profit_ace_tpt=(`p'+`delta')*(1+`inflation')-`depreciation'-`depreciation'*(1-`depreciation')-`debt_v'*i if t==1 & `deprtype'=="db"
replace profit_ace_tpt=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-`depreciation'*(1-`depreciation')^t -`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + min(0,profit_ace_tpt[_n-1]) if t>1 & `deprtype'=="db"
** Globe income (covered taxable income) is standard profit plus the tax credit
replace cov_profit_ace=(`p'+`delta')*(1+`inflation')-`depreciation'-`depreciation'*(1-`depreciation')-`debt_v'*i + (`taxrate')*i*(1-`depreciation') + QRTC if t==1 & `deprtype'=="db"
replace cov_profit_ace=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-`depreciation'*(1-`depreciation')^t -`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + (`taxrate')*i*(1-`depreciation')^t + min(0,cov_profit_ace[_n-1]) + QRTC if t>1 & `deprtype'=="db"
la var cov_profit_ace "covered tax of a refundable ACE: declining balance depreciation"
**Straight line
replace profit_ace=(`p'+`delta')*((1+`inflation')^t)*((1-`delta')^(t-1))-min(max(1-t*`depreciation',0),`depreciation')-i*max(1-t*`depreciation',0) if t>0 & `deprtype'=="sl"
la var profit_ace "profit under a refundable ACE: declining balance depreciation"
****
replace profit_ace_tpt=(`p'+`delta')*(1+`inflation')-`depreciation'-min(max(1-`depreciation',0),`depreciation') if t==1 & `deprtype'=="sl"
replace profit_ace_tpt=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-min(max(1-t*`depreciation',0),`depreciation') + min(0,profit_ace_tpt[_n-1]) if t>1 & `deprtype'=="sl"
** Globe income (covered taxable income) is standard profit plus the tax credit
replace cov_profit_ace=(`p'+`delta')*(1+`inflation')-`depreciation'-min(max(1-`depreciation',0),`depreciation')-`debt_v'*i + (`taxrate')*i*max(1-`depreciation',0) + QRTC if t==1 & `deprtype'=="sl"
replace cov_profit_ace=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-min(max(1-t*`depreciation',0),`depreciation')-`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + (`taxrate')*i*max(1-t*`depreciation',0) + min(0,cov_profit_ace[_n-1]) + QRTC if t>1 & `deprtype'=="sl"
la var cov_profit_ace "covered tax of a refundable ACE: declining balance depreciation"
*First, the domestic tax
gen double Tax_ace=0
replace Tax_ace=`taxrate' * profit_ace -QRTC-min(max(`taxrate'*profit_ace,0),NQRTC) if `holiday_v'==0
// period by period tax liability (if taxable income is negative, then tax is zero(i.e., refund))
replace Tax_ace=-QRTC if t<=`holiday_v' & `holiday_v'>0
replace Tax_ace=`taxrate' * profit_ace -QRTC-min(max(`taxrate'*profit_ace,0),NQRTC) if t>`holiday_v' & `holiday_v'>0
gen double Tax_ace_time= Tax_ace/((1 + rho) ^ t) // The discounted value of each period's tax liability
egen double Tax_ace_NPV= total(Tax_ace_time) // NPV of the the sum of taxes paid
*Second, the top-up tax part
gen double exprofit_ace=max(0,cov_profit_ace-SBIE)
la var exprofit_ace "Excess profit under ACE"
gen covtax_ace=0 // covered tax
replace covtax_ace=(`taxrate')*max(0,profit_ace_tpt)-min((`taxrate')*max(0,profit_ace_tpt),NQRTC) if `holiday_v'==0
replace covtax_ace=(`taxrate')*max(0,profit_ace_tpt)-min((`taxrate')*max(0,profit_ace_tpt),NQRTC) if t>`holiday_v' & `holiday_v'>0
gen double tpr_ace=max(0,`minrate'-(covtax_ace)/cov_profit_ace) if cov_profit_ace>0 //the top-up tax in each period for each value of the tax rate
la var tpr_ace "Top up tax rate under ACE"
gen double tpt_ace=tpr_ace*exprofit_ace/((1+rho)^t) // the discounted value of the top-up tax paid each period
egen total_tpt_ace=total(tpt_ace)
gen double econrent_ace=gamma*(revenue_NPV-1-Tax_ace_NPV-total_tpt_ace)+ `newequity_v'*(gamma-1)+ `debt_v'*gamma*( rho-i)/(rho-`inflation'+`delta'*(1+`inflation')) // Econonmic rent. The economic retun that reuslts in zero economic rent is the basis for METR
/*=========================
Third, define economic rent and check if economic rent is close enough to zero
=========================*/
if abs(econrent_ace) < `tolerance' {
display "Converged: p`taxrate' = " `p'
break
}
* Adjust p based on whether the sum is positive or negative
if abs(econrent_ace)>=0.1 {
local p = `p' - econrent_ace/10 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
if abs(econrent_ace)<0.1 {
local p = `p' - econrent_ace/5 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
* Increment the iteration counter
local iter = `iter' + 1
* Drop variables for the next iteration
drop revenue revenue_time revenue_NPV profit_ace Tax_ace Tax_ace_time Tax_ace_NPV profit_ace_tpt cov_profit_ace exprofit_ace covtax_ace tpr_ace tpt_ace total_tpt_ace econrent_ace // to allow for the next iteration
} // closing the iteration
* Display results if maximum iterations reached without converging
if `iter' == `max_iter' {
local p_formatted: display %9.5f `p'
display "Maximum iterations reached without convergence. Last p`taxrate' = " `p_formatted'
}
replace coc_ace= `p'
gen double METR_ACE= 100*(coc_ace-`r')/ coc_ace
replace coc_ace=100*coc_ace
if id!=1{
append using `ace_results' // Append results for this id
}
save `ace_results', replace // Save the updated results
}
drop t i gamma rho A_decline A_straight SBIE QRTC NQRTC
duplicates drop
format METR* %9.03f
format coc* %9.03f
save `ace_results', replace
}
} // closing the minimum tax==yes and refund=yes routine
***Standard CIT
if "`minimumtax'"=="yes" & "`refund'"=="no" {
if "`system'"=="cit" {
tempfile metr_norefund
save `metr_norefund', replace
* Initialize necessary variables globally
gen double coc_cit = . // Initialize variable for the cost of capital of a non-refundable CIT
* Define local parameters
local tolerance = 0.0001 // How close to zero we need to get economic rent
local max_iter = 1000 // Maximum number of iterations
* Get unique IDs
levelsof id_e, local(id_list)
* Create a temporary file to store results
tempfile cit_results
save `cit_results', emptyok // Start with an empty file for results
* Loop through each ID
foreach id in `id_list' {
* Load the original data copy for each ID
use `metr_norefund', clear
* Restrict data to the current id
quietly keep if id == `id'
* Set initial values
local p = `r' // Initial guess for cost of capital
local iter = 0 // Iteration counter
* Initialize ptilde_cit for this specific id
gen double coc_cit = .
* Begin the iterative process
while `iter' < `max_iter' {
* Calculate the economic rent (the difference between the pre-tax value and the tax paid) based on the current value of p
/*=========================
First, the pre-topup tax (we use the same for debt and equity finance becasue they are equivalent)
=========================*/
gen double revenue=0
replace revenue=0 if t==0 // revenue in period 0
replace revenue=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1) if t>0 // revenue in period t>0
gen double revenue_time=revenue/((1 + rho) ^ t) // discounted value of revenue
egen double revenue_NPV= total(revenue_time)
gen double profit_cit=0 if t==0 // accounting profit before tax credit
gen double profit_cit_tpt=0 if t==0
gen double cov_profit_cit=0 if t==0
**Declining balance
replace profit_cit=(`p'+`delta')*(1+`inflation')-`depreciation'-`depreciation'*(1-`depreciation')-`debt_v'*i if t==1 & `deprtype'=="db"
replace profit_cit=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-`depreciation'*(1-`depreciation')^t -`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + min(0,profit_cit[_n-1]) if t>1 & `deprtype'=="db"
****
replace profit_cit_tpt=(`p'+`delta')*(1+`inflation')-`depreciation'-`depreciation'*(1-`depreciation')-`debt_v'*i if t==1 & `deprtype'=="db"
replace profit_cit_tpt=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-`depreciation'*(1-`depreciation')^t -`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + min(0,profit_cit_tpt[_n-1]) if t>1 & `deprtype'=="db"
** Globe income (covered taxable income) is standard profit plus the tax credit
replace cov_profit_cit=(`p'+`delta')*(1+`inflation')-`depreciation'-`depreciation'*(1-`depreciation')-`debt_v'*i + QRTC if t==1 & `deprtype'=="db"
replace cov_profit_cit=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-`depreciation'*(1-`depreciation')^t -`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + min(0,cov_profit_cit[_n-1]) + QRTC if t>1 & `deprtype'=="db"
la var cov_profit_cit "covered tax of a standard CIT"
**Straight line
replace profit_cit=(`p'+`delta')*(1+`inflation')-`depreciation'-min(max(1-`depreciation',0),`depreciation')-`debt_v'*i if t==1 & `deprtype'=="sl"
replace profit_cit=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-min(max(1-t*`depreciation',0),`depreciation') -`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + min(0,profit_cit[_n-1]) if t>1 & `deprtype'=="sl"
****
replace profit_cit_tpt=(`p'+`delta')*(1+`inflation')-`depreciation'-min(max(1-`depreciation',0),`depreciation')-`debt_v'*i if t==1 & `deprtype'=="sl"
replace profit_cit_tpt=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-min(max(1-t*`depreciation',0),`depreciation') -`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + min(0,profit_cit_tpt[_n-1]) if t>1 & `deprtype'=="sl"
** Globe income (covered taxable income) is standard profit plus the tax credit
replace cov_profit_cit=(`p'+`delta')*(1+`inflation')-`depreciation'-min(max(1-`depreciation',0),`depreciation')-`debt_v'*i + QRTC if t==1 & `deprtype'=="sl"
replace cov_profit_cit=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-min(max(1-t*`depreciation',0),`depreciation')-`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + min(0,cov_profit_cit[_n-1]) + QRTC if t>1 & `deprtype'=="sl"
la var cov_profit_cit "covered tax of a standard CIT"
*First, the domestic tax
gen double Tax_cit=0
replace Tax_cit =(`taxrate')*max(profit_cit,0) -QRTC-min((`taxrate')*max(profit_cit,0),NQRTC) if `holiday_v'==0
// period by period tax liability (if taxable income is negative, then tax is zero (i.e., no-refund))
replace Tax_cit =-QRTC if t<=`holiday_v' & `holiday_v'>0
replace Tax_cit =(`taxrate')*max(profit_cit,0) -QRTC-min((`taxrate')*max(profit_cit,0),NQRTC) if t>`holiday_v' & `holiday_v'>0
gen double Tax_cit_time= Tax_cit/((1 + rho) ^ t) // The discounted value of each period's tax liability
egen double Tax_cit_NPV= total(Tax_cit_time) // NPV of the the sum of taxes paid
*Second, the top-up tax part
gen double exprofit_cit=max(0,cov_profit_cit-SBIE)
la var exprofit_cit "Excess profit under standard CIT"
gen covtax_cit=0 // covered tax
replace covtax_cit=(`taxrate')*max(0,profit_cit_tpt)-min((`taxrate')*max(0,profit_cit_tpt),NQRTC) if `holiday_v'==0
replace covtax_cit=(`taxrate')*max(0,profit_cit_tpt)-min((`taxrate')*max(0,profit_cit_tpt),NQRTC) if t>`holiday_v' & `holiday_v'>0
gen double tpr_cit=max(0,`minrate'-(covtax_cit)/cov_profit_cit) if cov_profit_cit>0 //the top-up tax in each period for each value of the tax rate
la var tpr_cit "Top up tax rate under stanadrd CIT"
gen double tpt_cit=tpr_cit*exprofit_cit/((1+rho)^t) // the discounted value of the top-up tax paid each period
egen total_tpt_cit=total(tpt_cit)
gen double econrent_cit=gamma*(revenue_NPV-1-Tax_cit_NPV-total_tpt_cit)+ `newequity_v'*(gamma-1)+ `debt_v'*gamma*(rho-i)/(rho-`inflation'+`delta'*(1+`inflation')) // Econonmic rent. The economic retun that reuslts in zero economic rent is the basis for METR
/*=========================
Third, define economic rent and check if economic rent is close enough to zero
=========================*/
if abs(econrent_cit) < `tolerance' {
display "Converged: p`taxrate' = " `p'
break
}
* Adjust p based on whether the sum is positive or negative
if abs(econrent_cit)>=0.1 {
local p = `p' - econrent_cit/10 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
if abs(econrent_cit)<0.1 {
local p = `p' - econrent_cit/5 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
* Increment the iteration counter
local iter = `iter' + 1
* Drop variables for the next iteration
drop revenue revenue_time revenue_NPV profit_cit Tax_cit Tax_cit_time Tax_cit_NPV profit_cit_tpt cov_profit_cit exprofit_cit covtax_cit tpr_cit tpt_cit total_tpt_cit econrent_cit // to allow for the next iteration
} // closing the iteration
* Display results if maximum iterations reached without converging
if `iter' == `max_iter' {
local p_formatted: display %9.5f `p'
display "Maximum iterations reached without convergence. Last p`taxrate' = " `p_formatted'
}
replace coc_cit= `p'
gen double METR_CIT= 100*(coc_cit-`r')/ coc_cit
replace coc_cit=100*coc_cit
if id!=1{
append using `cit_results' // Append results for this id
}
save `cit_results', replace // Save the updated results
}
drop t i gamma rho A_decline A_straight SBIE QRTC NQRTC // variables no longer needed
duplicates drop // to keep only one observatio per ID
la var coc_cit "The cost of capital of a CIT"
la var METR_CIT "Marginal effective tax rate of a CIT"
format METR* %9.03f
format coc* %9.03f
tempfile cit_results // keeping a local dataset containing the CIT METR
save `cit_results', replace
}
***Cash-flow tax
if "`system'"=="cft" {
tempfile metr_norefund
save `metr_norefund', replace
gen double coc_cft = . // Initialize variable for the cost of capital of a non-refundable CIT
* Define local parameters
local tolerance = 0.0001 // How close to zero we need to get economic rent
local max_iter = 1000 // Maximum number of iterations
* Get unique IDs
levelsof id_e, local(id_list)
* Create a temporary file to store results
tempfile cft_results
save `cft_results', emptyok // Start with an empty file for results
* Loop through each ID
foreach id in `id_list' {
* Load the original data copy for each ID
use `metr_norefund', clear
* Restrict data to the current id
quietly keep if id == `id'
* Set initial values
local p = `r' // Initial guess for cost of capital
local iter = 0 // Iteration counter
* Initialize ptilde_cit for this specific id
gen double coc_cft = .
* Begin the iterative process
while `iter' < `max_iter' {
gen double revenue=0
replace revenue=0 if t==0 // revenue in period 0
replace revenue=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1) if t>0 // revenue in period t>0
gen double revenue_time=revenue/((1 + rho) ^ t) // discounted value of revenue
egen double revenue_NPV= total(revenue_time)
gen double profit_cft=0
replace profit_cft=(`p'+`delta')*(1+`inflation')-1 if t==1
replace profit_cft=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)+min(0,profit_cft[_n-1]) if t>1
la var profit_cft "profit under a refundable cahsflow tax"
gen double Tax_cft=0
replace Tax_cft =(`taxrate')*max(profit_cft,0) -QRTC-min((`taxrate')*max(profit_cft,0),NQRTC) if `holiday_v'==0
// period by period tax liability (if taxable income is negative, then tax is zero (i.e., no-refund))
replace Tax_cft =-QRTC if t<=`holiday_v' & `holiday_v'>0
replace Tax_cft =(`taxrate')*max(profit_cft,0) -QRTC-min((`taxrate')*max(profit_cft,0),NQRTC) if t>`holiday_v' & `holiday_v'>0
gen double Tax_cft_time= Tax_cft/((1 + rho) ^ t) // The discounted value of each peruiod's tax liability
egen double Tax_cft_NPV= total(Tax_cft_time) // NPV of the the sum of taxes paid
/*=========================
Second, the top-up tax
=========================*/
gen double profit_cft_tpt=0 // covered tax for GloBE purposes. Since immediate expensing is a timing issue, the covered tax and top-up rate look similar to the case of a standard CIT financed with equity
gen double cov_profit_cft=0 // covered tax for GloBE purposes. Since immediate expensing is a timing issue, the covered tax and top-up rate look similar to the case of a standard CIT financed with equity
**Declining balance
replace profit_cft_tpt=(1+`inflation')*(`p'+`delta')-`depreciation'-`depreciation'*(1-`depreciation') if t==1 & `deprtype'=="db"
replace profit_cft_tpt=(1+`inflation')^t*(`p'+`delta')*(1-`delta')^(t-1)-`depreciation'*(1-`depreciation')^t + min(0,profit_cft_tpt[_n-1]) if t>1 & `deprtype'=="db"
la var profit_cft_tpt "the profit base for the covered tax"
replace cov_profit_cft=(1+`inflation')*(`p'+`delta')-`depreciation'-`depreciation'*(1-`depreciation')-`debt_v'*i + QRTC if t==1 & `deprtype'=="db"
replace cov_profit_cft=(1+`inflation')^t*(`p'+`delta')*(1-`delta')^(t-1)-`depreciation'*(1-`depreciation')^t -`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + min(0,cov_profit_cft[_n-1]) + QRTC if t>1 & `deprtype'=="db"
la var cov_profit_cft "covered tax of a cashflow tax under GlOBE: declining balance depreciation"
**Straight line
replace profit_cft_tpt=(1+`inflation')*(`p'+`delta')-`depreciation'-min(max(1-`depreciation',0),`depreciation') if t==1 & `deprtype'=="sl"
replace profit_cft_tpt=((1+`inflation')^t)*(`p'+`delta')*(1-`delta')^(t-1)-min(max(1-t*`depreciation',0),`depreciation') + min(0,profit_cft_tpt[_n-1]) if t>1 & `deprtype'=="sl"
la var profit_cft_tpt "the profit base for the covered tax"
replace cov_profit_cft=(`p'+`delta')*(1+`inflation')-`depreciation'-min(max(1-`depreciation',0),`depreciation')-`debt_v'*i + QRTC if t==1 & `deprtype'=="sl"
replace cov_profit_cft=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1)-min(max(1-t*`depreciation',0),`depreciation') -`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + min(0,cov_profit_cft[_n-1]) + QRTC if t>1 & `deprtype'=="sl"
la var cov_profit_cft "covered tax of a cashflow tax under GlOBE: declining balance depreciation"
gen double exprofit_cft=max(0,cov_profit_cft-SBIE)
la var exprofit_cft "Excess profit under refundable cashfolow tax: GloBE declining balance depreciation"
gen covtax_cft=0 // covered tax
replace covtax_cft=(`taxrate')*max(0,profit_cft_tpt)-min((`taxrate')*max(0,profit_cft_tpt),NQRTC) if `holiday_v'==0
replace covtax_cft=(`taxrate')*max(0,profit_cft_tpt)-min((`taxrate')*max(0,profit_cft_tpt),NQRTC) if t>`holiday_v' & `holiday_v'>0
gen double tpr_cft=max(0,`minrate'-(covtax_cft)/cov_profit_cft) if cov_profit_cft>0
la var tpr_cft "Top up tax rate under R based cashflow tax"
gen double tpt_cft=tpr_cft*exprofit_cft/((1+rho)^t) // top-up tax (discounted value)
egen double total_tpt_cft=total(tpt_cft)
gen double econrent_cft=gamma*(revenue_NPV-1-Tax_cft_NPV-total_tpt_cft)+ `newequity_v'*(gamma-1)+ `debt_v'*gamma*( rho-i)/(rho-`inflation'+`delta'*(1+`inflation')) // Econonmic rent. The economic retun that reuslts in zero economic rent is the basis for METR
/*=========================
Third, define economic rent and check if economic rent is close enough to zero
=========================*/
if abs(econrent_cft) < `tolerance' {
display "Converged: p`taxrate' = " `p'
break
}
* Adjust p based on whether the sum is positive or negative
if abs(econrent_cft)>=0.1 {
local p = `p' - econrent_cft/10 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
if abs(econrent_cft)<0.1 {
local p = `p' - econrent_cft/5 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
* Increment the iteration counter
local iter = `iter' + 1
* Drop variables for the next iteration
drop revenue revenue_time revenue_NPV profit_cft profit_cft_tpt Tax_cft Tax_cft_time Tax_cft_NPV cov_profit_cft exprofit_cft covtax_cft tpr_cft tpt_cft total_tpt_cft econrent_cft // to allow for the next iteration
} // closing the iternation
* Display results if maximum iterations reached without converging
if `iter' == `max_iter' {
local p_formatted: display %9.5f `p'
display "Maximum iterations reached without convergence. Last p`taxrate' = " `p_formatted'
}
replace coc_cft= `p'
gen double METR_CFT= 100*(coc_cft-`r')/ coc_cft
replace coc_cft=100*coc_cft
if id!=1{
append using `cft_results' // Append results for this id
}
save `cft_results', replace // Save the updated results
}
drop t i gamma rho A_decline A_straight SBIE QRTC NQRTC
duplicates drop
la var coc_cft "The cost of capital of a cashflow tax"
la var METR_CFT "Marginal effective tax rate of a cashflow tax system"
format METR* %9.03f
format coc* %9.03f
tempfile cft_results
save `cft_results', replace
}
***ACE
if "`system'"=="ace" {
tempfile metr_norefund
save `metr_norefund', replace
gen double coc_ace = . // Initialize variable for the cost of capital of a non-refundable CIT
* Define local parameters
local tolerance = 0.0001 // How close to zero we need to get economic rent
local max_iter = 1000 // Maximum number of iterations
* Get unique IDs
levelsof id, local(id_list)
* Create a temporary file to store results
tempfile ace_results
save `ace_results', emptyok // Start with an empty file for results
* Loop through each ID
foreach id in `id_list' {
* Load the original data copy for each ID
use `metr_norefund', clear
* Restrict data to the current id
quietly keep if id == `id'
* Set initial values
local p = `r' // Initial guess for cost of capital
local iter = 0 // Iteration counter
* Initialize ptilde_cit for this specific id
gen double coc_ace = .
* Begin the iterative process
while `iter' < `max_iter' {
* Calculate the economic rent (the difference between the pre-tax value and the tax paid) based on the current value of p
/*=====================
First, the pre-top-up tax (we use the same for debt and equity finance becasue they are equivalent)
======================*/
gen double revenue=0
replace revenue=0 if t==0 // revenue in period 0
replace revenue=(`p'+`delta')*((1+`inflation')^t)*(1-`delta')^(t-1) if t>0 // revenue in period t>0
gen double revenue_time=revenue/((1 + rho) ^ t) // discounted value of revenue
egen double revenue_NPV= total(revenue_time)
gen double profit_ace=0
gen double cov_profit_ace=0
**Declining balance
replace profit_ace=(`p'+`delta')*(1+`inflation')-`depreciation'-`depreciation'*(1-`depreciation')-i*(1-`depreciation') if t==1 & `deprtype'=="db" // i*(1-phi) is the allowance for corporate equity
replace profit_ace=(`p'+`delta')*((1+`inflation')^t)*((1-`delta')^(t-1))-`depreciation'*(1-`depreciation')^t-i*(1-`depreciation')^t + min(0,profit_ace[_n-1]) if t>1 & `deprtype'=="db"
la var profit_ace "profit under non-refundable ACE and declining balance depreciation"
****for the top-up tax
replace cov_profit_ace=(`p'+`delta')*(1+`inflation')-`depreciation'-`depreciation'*(1-`depreciation') -`debt_v'*i + QRTC if t==1 & `deprtype'=="db"
replace cov_profit_ace=(`p'+`delta')*((1+`inflation')^t)*((1-`delta')^(t-1))-`depreciation'*(1-`depreciation')^t-`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + min(0,cov_profit_ace[_n-1]) + QRTC if t>1 & `deprtype'=="db"
la var cov_profit_ace "covered tax under non-refundable ACE"
**Straight line
replace profit_ace=(`p'+`delta')*(1+`inflation')-`depreciation'-min(max(1-`depreciation',0),`depreciation')- i*max(1-`depreciation',0) if t==1 & `deprtype'=="sl" // i*(1-phi) is the allowance for corporate equity
replace profit_ace=(`p'+`delta')*((1+`inflation')^t)*((1-`delta')^(t-1))-min(max(1-t*`depreciation',0),`depreciation')-i*max(1-t*`depreciation',0) + min(0,profit_ace[_n-1]) if t>1 & `deprtype'=="sl"
la var profit_ace "profit under non-refundable ACE"
****for the top-up tax
replace cov_profit_ace=(`p'+`delta')*(1+`inflation')-`depreciation'-min(max(1-`depreciation',0),`depreciation') -`debt_v'*i + QRTC if t==1 & `deprtype'=="sl"
replace cov_profit_ace=(`p'+`delta')*((1+`inflation')^t)*((1-`delta')^(t-1))-min(max(1-t*`depreciation',0),`depreciation')-`debt_v'*i*((1+`inflation')*(1-`delta'))^(t-1) + min(0,cov_profit_ace[_n-1]) + QRTC if t>1 & `deprtype'=="sl"
la var cov_profit_ace "covered tax under non-refundable ACE"
gen double Tax_ace=0
replace Tax_ace=(`taxrate')*max(profit_ace,0) -QRTC-min((`taxrate')*max(profit_ace,0),NQRTC) if `holiday_v'==0
// period by period tax liability (if taxable income is negative, then tax is zero (i.e., no-refund))
replace Tax_ace=-QRTC if t<=`holiday_v' & `holiday_v'>0
replace Tax_ace=(`taxrate')*max(profit_ace,0) -QRTC-min((`taxrate')*max(profit_ace,0),NQRTC) if t>`holiday_v' & `holiday_v'>0
gen double Tax_ace_time = Tax_ace/((1 + rho) ^ t) // The discounted value of each peruiod's tax liability
egen double Tax_ace_NPV = total(Tax_ace_time) // NPV of the the sum of taxes paid
/*====================
Second, the top-up tax
======================*/
*Calculate the top-up tax base (note that the top-up tax base is the accounting profit (not including the tax credit) minus SBIE.)
gen double exprofit_ace=max(0,cov_profit_ace-SBIE)
gen covtax_ace=0 // covered tax
replace covtax_ace=(`taxrate')*max(0,profit_ace)-min((`taxrate')*max(0,profit_ace),NQRTC) if `holiday_v'==0
replace covtax_ace=(`taxrate')*max(0,profit_ace)-min((`taxrate')*max(0,profit_ace),NQRTC) if t>`holiday_v' & `holiday_v'>0
gen double tpr_ace=0
replace tpr_ace=max(0,`minrate'-(covtax_ace)/cov_profit_ace) if cov_profit_ace>0 //the top-up tax in each period for each value of the tax rate
la var tpr_ace "Top up tax rate under a non-refundable ACE"
gen double tpt_ace=tpr_ace*exprofit_ace/(1+rho)^t // top-up tax (discounted value) (nothe: the excess profit is similar to the excess profit value under the standard CIT)
egen double total_tpt_ace=total(tpt_ace)
/*=========================
Third, define economic rent and check if economic rent is close enough to zero
=========================*/
gen double econrent_ace=gamma*(revenue_NPV-1-Tax_ace_NPV-total_tpt_ace)+ `newequity_v'*(gamma-1)+ `debt_v'*gamma*(rho-i)/(rho-`inflation'+`delta'*(1+`inflation')) // Econonmic rent. The economic retun that reuslts in zero economic rent is the basis for METR
if abs(econrent_ace) < `tolerance' {
display "Converged: p`taxrate' = " `p'
break
}
* Adjust p based on whether the sum is positive or negative
if abs(econrent_ace)>=0.1 {
local p = `p' - econrent_ace/10 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
if abs(econrent_ace)<0.1 {
local p = `p' - econrent_ace/5 // adjust p downwards if economic rent is positive and upwards if econ rent is negative
}
* Increment the iteration counter
local iter = `iter' + 1
* Drop variables for the next iteration
drop revenue revenue_time revenue_NPV profit_ace Tax_ace Tax_ace_time Tax_ace_NPV cov_profit_ace exprofit_ace covtax_ace tpr_ace tpt_ace total_tpt_ace econrent_ace // to allow for the next iteration
}
* Display results if maximum iterations reached without converging
if `iter' == `max_iter' {
local p_formatted: display %9.5f `p'
display "Maximum iterations reached without convergence. Last p`taxrate' = " `p_formatted'
}
replace coc_ace = `p'
gen METR_ACE= 100*(coc_ace-`r')/coc_ace
replace coc_ace=100*coc_ace
if id!=1{
append using `ace_results' // Append results for this id
}
save `ace_results', replace // Save the updated results
}
drop t i gamma rho A_decline A_straight SBIE QRTC NQRTC
duplicates drop
la var coc_ace "The cost of capital of an ACE system"
la var METR_ACE "Marginal tax rate of an ACE system"
format METR* %9.03f
format coc* %9.03f
tempfile ace_results
save `ace_results', replace
}
} // closing the minimum tax==yes and refund==no routine
merge 1:1 id_e using `aetr'
drop _m id_e
} // closing the quitely part
********************
if "`minimumtax'"=="yes" {
matrix parameters= J(5, 1,.) // Create a 2x1 matrix
matrix parameters[1, 1] = 100*`profit'
matrix parameters[2, 1] = 100*`sbie'
matrix parameters[3, 1] = `qrtc'
matrix parameters[4, 1] = `nqrtc'
matrix parameters[5, 1] = 100*`minrate'
matrix rownames parameters ="Profitability (%)" ///
"SBIE (%)" "QRTC (%)" "NQRTC (%)" ///
"The minimum tax rate (%)"
local refund_text
if "`refund'" == "yes" {
local refund_text "Full loss offset: Yes"
}
else if "`refund'" == "no" {
local refund_text "Full loss offset: No"
}
local minimumtax_text "Pillar two minimum tax applies"
qui {
esttab matrix(parameters) using parameters.txt, replace ///
cells("b") noabbrev varwidth(30) noobs nonumber ///
eqlabels(none) mlabels(,none) collabels("Parameters") ///
alignment(c) gaps nolines nolines ///
addnotes("`depr_text'" "`refund_text'" "`minimumtax_text'")
}
type parameters.txt
}
if "`minimumtax'"=="no" {
matrix parameters= J(1, 1,.) // Create a 2x1 matrix
matrix parameters[1, 1] = 100*`profit'
matrix rownames parameters ="Profitability (%)"
local refund_text
if "`refund'" == "yes" {
local refund_text "Full loss offset: Yes"
}
else if "`refund'" == "no" {
local refund_text "Full loss offset: No"
}
local minimumtax_text "Pillar two minimum tax does not apply"
qui {
esttab matrix(parameters) using parameters.txt, replace ///
cells("b") noabbrev varwidth(30) noobs nonumber ///
eqlabels(none) mlabels(,none) collabels("Parameters") ///
alignment(c) gaps nolines nolines ///
addnotes("`depr_text'" "`refund_text'" "`minimumtax_text'")
}
type parameters.txt
}
end