Rental Property Tax Deductions and Individual Investor Housing Demand
Author: Christian Gillitzer
This paper provides evidence on how individual taxpayers respond to rental property tax incentives in a system where capital gains are taxed concessionally and rental losses are fully deductible against labour income. Using administrative tax return data from Australia and variation in marginal tax rates induced by mid-2000s reforms, I show that reductions in marginal rates significantly reduce the likelihood of holding an investment property with a negative net rental income position. My findings demonstrate how debt is used to generate tax losses and thereby shift income from the labour to capital gains tax base, providing new evidence on how leverage-based income shifting opportunities can shape rental investment behaviour and the composition of housing demand. The empirical results are consistent with a standard model, which I leverage to derive predictions for the effects of reforms to the tax treatment of rental deductions.
Intangible Capital and Firm Productivity: The Case of China
Author: Sasan Bakhtiari
This study examines the role of intangible assets in enhancing firm productivity in China and explores how the relationship varies by state ownership, sector and technology. I use the Levinsohn-Petrin method to estimate an extended production function with intangibles alongside the traditional factors. The estimated elasticity for intangibles falls within the upper bounds estimated in the existing literature. Elasticity rises with state ownership but is lower for old traditional firms. The type of intellectual property also matters. Invention patents contribute to productivity in medium- and high-technology sectors. Design also contributes when considering goods producing sectors. Utility models (short-term patents) exhibit no benefits. A temporal analysis highlights a transition period during which reliance on non-patent intangibles within medium- and high-technology sectors in China grows. It also highlights low technology sectors increasing their reliance on patented rights, especially designs. These trends reach an equilibrium in 2016 but fall for manufacturing during and after the COVID-19 pandemic.
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