The Treasury

Global Navigation

Personal tools

You are here: Home > Publications > Research and Policy > Working Papers > 2015 > The Impact of Tax Changes on the Short-run Investment Behaviour of New Zealand Firms (WP 15/05)


The Impact of Tax Changes on the Short-run Investment Behaviour of New Zealand Firms

Publication Details

  • The Impact of Tax Changes on the Short-run Investment Behaviour of New Zealand Firms (WP 15/05)
  • Published: 23 Jun 2015
  • Status: Current
  • Authors: Fabling, Richard; Kneller, Richard; Sanderson, Lynda
  • Pages: (3),ii,12
  • ISBN: 978-0-478-43658-7 (Online)
  • Ref. No: WP 15/05
  • Pub. type: Working Papers
  • JEL Classification: D22; H20

The Impact of Tax Changes on the Short-run Investment Behaviour of New Zealand Firms

Published 23 June 2015

Authors: Richard Fabling, Richard Kneller and Lynda Sanderson


This paper examines firm-level investment responses to exogenous changes in the forward-looking user cost of capital associated with reforms to the corporate and personal tax system over the last decade. Adjustments to personal tax rates and fiscal depreciation allowances provide a direct lever through which government policy can affect the cost of capital faced by firms. The effect of these tax adjustments differs across firms according to their asset structure, providing both inter-temporal and inter-firm variation in UCCs and enabling an assessment of the short-run impact of UCC changes on investment behaviour. This analysis shows that while tax-induced changes in the UCC have significantly affected investment behaviour among some firms, the aggregate impacts are likely to have been negligible as the industries in which investment impacts are observed make a very small contribution to aggregate investment.


Browse section/chapter Download/Page range

1 Introduction

2 Empirical Methodology

3 Results

4 Conclusion



twp15-05.pdf (371 KB) pp. (3),i-ii,1-12


The authors wish to thank Statistics New Zealand for access to the data, and Norman Gemmell, Mario DiMaio and Daniel Snethlage for valuable comments and suggestions. This research was initiated while Richard Kneller was a Visiting Research Fellow at the New Zealand Treasury. Richard Fabling also thanks the Treasury for funding this research.


The results in this paper are not official statistics, they have been created for research purposes from the Integrated Data Infrastructure (IDI) managed by Statistics New Zealand. The opinions, findings, recommendations and conclusions expressed in this paper are those of the authors, not Statistics NZ, the New Zealand Treasury or Motu.

Access to the anonymised data used in this study was provided by Statistics NZ in accordance with security and confidentiality provisions of the Statistics Act 1975. Only people authorised by the Statistics Act 1975 are allowed to see data about a particular person, household, business or organisation and the results in this paper have been confidentialised to protect these groups from identification.

Careful consideration has been given to the privacy, security and confidentiality issues associated with using administrative and survey data in the IDI. Further detail can be found in the Privacy impact assessment for the Integrated Data Infrastructure available from

The results are based in part on tax data supplied by Inland Revenue to Statistics NZ under the Tax Administration Act 1994. This tax data must be used only for statistical purposes, and no individual information may be published or disclosed in any other form, or provided to Inland Revenue for administrative or regulatory purposes. Any person who has had access to the unit-record data has certified that they have been shown, have read, and have understood section 81 of the Tax Administration Act 1994, which relates to secrecy. Any discussion of data limitations or weaknesses is in the context of using the IDI for statistical purposes, and is not related to the data's ability to support Inland Revenue's core operational requirements.

Page top