Tax clientele effects in the term structure of UK interest rates?

Levin, E.J. and Wright, R.E. (2001) Tax clientele effects in the term structure of UK interest rates? Journal of Business Finance and Accounting, 28(3-4), pp. 303-325. (doi: 10.1111/1468-5957.00375)

Abstract

This paper tests for tax clientele effects in the term structure of UK interest rates. Five empirical models of the term structure of interest rates, incorporating tax effects, are estimated with daily data covering the period 31 March, 1995 to 3 August, 1995. In May 1995, the British government announced its intention to eliminate the tax exemption on capital gains from government bonds, but subsequently in July 1995 backtracked on some of its initial proposals. This period therefore forms the basis of a crude natural experiment in the sense that it provides an opportunity to examine tax clientele effects ‘before’ and ‘after’ an event which should have levelled greatly the taxing of government bonds. The empirical analysis suggests large tax clientele effects. However, there is little evidence of tax-specific term structures of interest rates.

• Item Type: Articles
• Keywords: effects,
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Levin, Dr Eric and Wright, Dr Robert
• Authors: Levin, E.J., and Wright, R.E.
• College/School: College of Social Sciences > School of Social and Political Sciences > Urban Studies
• Journal Name: Journal of Business Finance and Accounting
• Publisher: Blackwell Publishing
• ISSN: 0306-686X
• Published Online: 03 March 2003