Appendix E * Estimating the cost of TIPT: technical procedures This appendix documents the technical procedures used to estimate
the cost of TIPT, as measured by the revenue loss and other costs
associated with TIPT.
Again, because the TIPT was introduced in October 2001, we
assume the usual time lag in implementation of any legislation and
ignore the “instant” impact of TIPT in 2001.
Step 1: Estimate the total revenue loss associated with TIPT for 2002–2015 (table 4) 1.1 Based on the annual tax expenditures associated with TIPT
(TITP-TE) estimated by the DR team for 2011–2015, estimat-
ing the average ratio of TIPT-TE to TTR (total tax revenue),
the result is 0.54 per cent.
1.2 Applying the 0.54 per cent ratio of TIPT-TE to TTR to the
annual tax revenue for 2002–2010, which is based on the CIAT
dataset (2015), to arrive at the annual TIPT-TE for these years
and complete the time series on TIPT-TE for 2002–2015. (CIAT
stands for Inter-American Center of Tax Administrations.)
1.3 Converting the time series on TIPT-TE from its “current”
value to the equivalent 2015 DOP value, based on the con-
sumer price index (CPI).
Step 2: Estimate the negative multiplier effect of TIPT-TE (table 4) 2.1 Applying the multiplier of 1.3 (as explained in the text) to
the annual TIPT-TE on the 2015 constant DOP, the result
net of TIPT-TE is a time series of “induced GDP loss”, or the
net negative multiplier effect of TIPT-TE on an annual basis for
2002–2015.
*
Prepared by Duanjie Chen, Research Fellow, School of Public Policy, Univer-
sity of Calgary.
170
Design and Assessment of Tax Incentives
2.2 Applying the annual ratio of total tax revenue to GDP, as pub-
lished by OECD for DR, to the induced GDP loss, the result is
a time series of “induced” revenue loss for 2002–2015.
