Zusammenfassung der Ressource
Implicit, Explicit and Total
Tax
- Explicit Tax
- Tax paid directly to
the government
- It's the difference between the assets pre tax and post tax, rate of
return
- Pre tax rate of return is 10%
(Ra)
- Post tax rate of return is 7% (ra)
- Explicit tax = (Ra-ra)=3%
- Explicit tax rate is
therefore (Ra - ra)/Ra
- Implicit Tax
- 2 assets with identical pre tax flows but cash
flows from 1 asset are taxed more favourably,
taxpayers will bid for the right to have this
- As a result the tax
favoured asset price
increases, if the price
increases the returns
decrease
- The reduction (increase) in an
assets pre-tax rate of return
resulting from its favorable
(unfavorable) tax treatment
- Calculating
- Difference between
a benchmark and a
tax favoured asset
- (Rb - Rf) = 3%
- Implicit tax on a tax exempt asset
- (Rb - Rb) = 0%
- Implicit tax on a benchmark asset
- Pre-tax return on a benchmark is 10%=Rb
- Pre-tax return on tax exempt asset is 7%=Rf
- Implicit tax is paid
to issuers of tax
favoured assets (via
increased prices)
- Implicit Rate
- When applied to
Benchmark leave a return
equal to the before tax
rate of return on the
alternative investment,
the tax free asset
- (Rb - Rf)/Rb
- (10 - 7)/10 = 30%
- Paying a tax rate of
30% on benchmark
would result in a turn
of 7% as the Rf
- Benchmark Asset
- Fully taxed asset
- Tax favoured asset
- taxed more lightly than
a benchmark asset
- if highly not
favoured asset
disfavoured
- Types
- full tax exemption,
partial exemption,
lower marginal tax rate
and tax credits
- Total tax
- In a competitive equilibrium
the after tax returns on all
assets must be equal and this
implies that total tax must be
the same
- total tax = implicit tax +explicit tax
- total tax for both assets is 3%
- Rate
- = implicit rate + explicit rate