Measuring the impact of financial taxation on capital: evidence from Chilean manufacturing plants

Using panel data from Chilean manufacturing plants, we estimate the impact of a stamp tax, levied on loans by financial institutions, on capital stock. Our results show that the tax has a statistically significant negative effect on the stock of capital. Specifically, we find that a rise of one percentage point in the financial tax rate decreases the stock of capital by about 4%. We also find that the impact on firms is heterogeneous, depending on the intensity of the different types of capital they hold. In particular, the demand for capital from firms with a higher percentage of structural assets, such as land and buildings, is relatively less affected by the tax.