An Investigation of the Firm Size—Effective Tax Rate Relation in the 1980s

1993 ◽  
Vol 8 (2) ◽  
pp. 167-182 ◽  
Author(s):  
Thomas C. Omer ◽  
Karen H. Molloy ◽  
David A. Ziebart
Keyword(s):  
Firm Size ◽  
Tax Burden ◽  
Tax Rates ◽  
Corporate Tax ◽  
Effective Tax Rate ◽  
Effective Tax Rates ◽  
Policy Makers ◽  
Tax Rate ◽  
Sample Composition ◽  
Rate Relation

Given the recent emphasis on effective tax rates by policy makers and accounting researchers, this study investigates the relation between firm size and corporate tax burdens on a yearly and an industry basis. The analysis is conducted using five effective tax measures employed in previous studies in order to determine the degree to which inferences between size and tax burden are robust across these different effective tax measures. The results indicate that the relation is fairly robust across measures and, in instances in which the relation is not upheld by our analysis, sample composition explains differences in the observed relation between firm size and corporate tax burden.

scholarly journals Company Taxation in the European Union

2012 ◽  
Vol 14 (3) ◽  
pp. 119-136 ◽  
Author(s):  
Dorota Wawrzyniak
Keyword(s):  
Tax Burden ◽  
Tax Rates ◽  
The European Union ◽  
Corporate Tax ◽  
Effective Tax Rates ◽  
Tax Rate ◽  
Advantages And Disadvantages ◽  
Company Taxation ◽  
Statutory Tax Rate ◽  
The Eu

This paper investigates different measures of corporate tax burden ranging from the most basic ones such as the statutory tax rate to the effective tax rates. Each of these measures has advantages and disadvantages and they may lead to different rankings of countries. One of the reasons lies the fact that they measure different things. The comparison of the statutory tax rates to the effective ones for the EU-27 during the period of 1998-2009 sometimes reveals very significant differences between these indicators. Taking this into consideration, the paper suggests that corporate tax burden analysis should not be limited to the most basic and readily available measure in the form of the statutory tax rate. Different measures are tailored to answer different research questions. Moreover, the article presents changes of company taxation for the EU-27 within 1998-2009.

Long-Run Corporate Tax Avoidance

2008 ◽  
Vol 83 (1) ◽  
pp. 61-82 ◽  
Author(s):  
Scott D. Dyreng ◽  
Michelle Hanlon ◽  
Edward L. Maydew
Keyword(s):  
Tax Avoidance ◽  
Tax Rates ◽  
Corporate Tax ◽  
Effective Tax Rate ◽  
Initial Examination ◽  
Cross Sectional ◽  
Effective Tax Rates ◽  
Sample Mean ◽  
Tax Rate ◽  
Long Run

We develop and describe a new measure of long-run corporate tax avoidance that is based on the ability to pay a low amount of cash taxes per dollar of pre-tax earnings over long time periods. We label this measure the “long-run cash effective tax rate.” We use the long-run cash effective tax rate to examine (1) the extent to which some firms are able to avoid taxes over periods as long as ten years, and (2) how predictive one-year tax rates are for long-run tax avoidance. In our sample of 2,077 firms, we find there is considerable cross-sectional variation in tax avoidance. For example, approximately one-fourth of our sample firms are able to maintain long-run cash effective tax rates below 20 percent, compared to a sample mean tax rate of approximately 30 percent. We also find that annual cash effective tax rates are not very good predictors of long-run cash effective tax rates and, thus, are not accurate proxies for long-run tax avoidance. While there is some evidence of persistence in annual cash effective tax rates, the persistence is asymmetric. Low annual cash effective tax rates are more persistent than are high annual cash effective tax rates. An initial examination of characteristics of firms successful at keeping their cash effective tax rates low over long periods shows that they are well spread across industries but with some clustering.

Effective Tax Rate Time Trends and its Determinants: Insight From The Corporate Taxpayer Utilising Reinvestment Allowance In Malaysia

2021 ◽  
Vol 12 (1) ◽  
pp. 46-46
Author(s):  
Fairus Halizam A. Hamzah ◽  
Nadiah Abd Hamid ◽  
Siti Noorhayati Mohamed Zawawi
Keyword(s):  
Tax Avoidance ◽  
Tax Revenue ◽  
Tax Rates ◽  
Corporate Tax ◽  
Effective Tax Rate ◽  
Effective Tax Rates ◽  
Tax Rate ◽  
Tax Incentive ◽  
Utilisation Rate ◽  
Tax Deduction

This study aims to provide evidence on the trend in corporate tax revenue from the application of time-trend analysis of effective tax rate (ETR) amongst corporate taxpayers in Malaysia who claimed reinvestment allowance (RA) over a decade between 2007 and 2016. This study chose these observation periods because the Malaysian corporate STR has been found to have gradually reduced from 27 per cent to 24 per cent between 2007 to 2016, whereby these changes somehow impacted the tax revenue. Taxpayers who used RA for tax planning pay low taxes over time, determined through tax return data. Then, the study intended to examine the relationships between certain tax attributes, namely, company's profitability (ROA), the reinvestment allowance utilisation rate (RAUTI), type of corporate taxpayers (TPP), the book-tax gap (BTG) and how they associate to the trend in ETR. Reinvestment Allowance (RA) is renowned for being a corporate tax incentive in Malaysia to encourage investments in qualified projects through a tax deduction. An incentivised firm that pays low tax may not be engaging in fraudulent management, as generally assumed. However, it could have been due to tax avoidance strategies that can be observed through reduced or lowered effective tax rate (ETR) across ten years. Keywords: Effective Tax Rates, Tax Avoidance, Reinvestment Allowance, Tax Incentive, Taxation.

scholarly journals Tax Incentives: An Effective Mechanism to Achieve EU Harmonization?

2020 ◽  
Vol 2 (2) ◽  
pp. 1
Author(s):  
Elisabeth Bustos-Contell ◽  
Salvador Climent-Serrano ◽  
Gregorio Labatut-Serer
Keyword(s):  
Tax Incentives ◽  
Tax Burden ◽  
Tax Rates ◽  
Incentive Structure ◽  
Effective Tax Rate ◽  
Effective Tax Rates ◽  
Member States ◽  
Tax Rate ◽  
Tax Harmonization ◽  
Statutory Tax Rate

For decades, European Union (EU) wide corporate tax harmonization has been sought to eradicate business relocation for tax reasons. It is hoped that this harmonization will ensure that companies pay taxes in the countries where they operate. One mechanism that countries use to achieve this harmonization is tax incentives. Yet each country establishes its own incentive structure, according to its statutory tax rate. This study analyzes the effective tax burden in the initial 15 EU member states between 2006 and 2014 to identify significant differences that prevent tax harmonization across these countries. The statutory and effective tax rates are used to evaluate the tax burden. The net tax incentives and disincentives are also considered. The analysis shows that between 2006 and 2014, these 15 member states used tax incentives to close the gaps among these countries’ tax burdens. Countries with above-average effective tax rates offered greater tax incentives than countries with below-average effective tax rates. However, though these tax policies reduced the gap in the tax burden, harmonization of the effective tax rate was not achieved during the study period.

scholarly journals The Interplay Between Tax Havens, Geographic Disclosures and Corporate Tax Avoidance: Evidence from European Union

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Sameh Kobbi-Fakhfakh
Keyword(s):  
Tax Avoidance ◽  
Positive Association ◽  
Tax Rates ◽  
Corporate Tax ◽  
Effective Tax Rate ◽  
Effective Tax Rates ◽  
Tax Havens ◽  
Tax Rate ◽  
Reporting Practices ◽  
Tax Haven

Abstract This study examines the interplay between tax haven use, geographic disclosures and corporate tax avoidance. Based on a panel of 497 non-financial EU listed firms during the period 2006–2012, we provide evidence that corporate groups with affiliates in tax havens tend to have lower effective tax rates and lower geographic disclosures fineness scores. We, also, find a positive association between geographic disclosures fineness scores and the firms’ effective tax rates. We, further, find that the negative association between tax haven use and the effective tax rate is more pronounced for firms disclosing geographic information at a more aggregated level, showing a moderating effect of geographic disclosures fineness on such association. Our findings are based upon hand-collected data on corporate geographical dispersion, and corroborated by several additional and robustness tests. The research results should be of concern to policymakers and others interested in multinational companies’ segment reporting practices and tax planning activities.

The Relationship Between Effective Tax Rate and Firm Size

2020 ◽  
Vol 7 (2) ◽  
pp. 37-61
Author(s):  
Epameinondas Katsikas ◽  
Dimitrios Koufopoulos ◽  
Jacob Lewis
Keyword(s):  
Firm Size ◽  
Retail Trade ◽  
Research Approach ◽  
Tax Rates ◽  
Effective Tax Rate ◽  
Effective Tax Rates ◽  
Tax Rate ◽  
Factors Affecting ◽  
Trade Sector ◽  
The Relationship

The current research studies firm size and other determinants of effective tax rates for UK companies operating in the wholesale and retail trade sector. A panel of 784 companies from the BvD Company Independence Indicator (BvD's FAME database) is studied over the six-year period 2008-2013. The research approach is unique in terms of the comprehensive data it is using as it is large panel data and it involves finance and accounting analytics. The analysis shows that size and profitability were significant factors affecting the average effective tax rates of companies in the wholesale and retail trade sector.

scholarly journals Determinants of effective Tax Rate of the top 45 Largest listed companies of Indonesia

2017 ◽  
Vol 9 (3) ◽  
pp. 1183-1188 ◽  
Author(s):  
Dr. Andreas ◽  
Enni Savitri
Keyword(s):  
Income Tax ◽  
Capital Intensity ◽  
Listed Companies ◽  
Tax Rates ◽  
Corporate Tax ◽  
Effective Tax Rate ◽  
Effective Tax Rates ◽  
Tax Rate ◽  
Independent Variables ◽  
Tax Expense

The capital inflows and outflows of a country are closely related to the established tax rate policy. Tax rate is one of important factors in investment decisions. Evidence that there are variations in effective tax rates amongs firms draw attention of researchers to understand the impact of tax policies on corporate tax burdens (Gupta and Newberry, 1997; Molloy, 1998). Effective tax rate is a dependent variable that is commonly used as a proxy to measure corporate tax burden. This study examined corporate effective tax rates (ETRs) of the top 45 largest listed companies of Indonesia within 2009-2014 (after tax reform of 2008, to be exact). We used two types of ETR1 and ETR2 measures as dependent variables. The first type is the ratio of current income tax expense divided by income before interest and taxes and the second type is the ratio of total income tax expense (current tax expense plus deferred tax expense) divided by income before interest and taxes (Noor et al. 2008).We also used some of independent variables related to firms’characteristics, such as firm size, capital intensity, leverage, returns on assets, and inventory intensity. The statistical results reveal that all independent variables contributed to ETR1 and ETR2 except the capital intensity is not contributed to ETR2. However, the findings provide support for the tax policy on corporate actual tax burdens.

A Study of Perceived Ethicality of Low Corporate Effective Tax Rates

2017 ◽  
Vol 32 (1) ◽  
pp. 87-104 ◽  
Author(s):  
F. Todd DeZoort ◽  
Troy J. Pollard ◽  
Edward J. Schnee
Keyword(s):  
Mediation Analysis ◽  
General Public ◽  
Tax Avoidance ◽  
Tax Rates ◽  
Perceived Fairness ◽  
Effective Tax Rate ◽  
Effective Tax Rates ◽  
Tax Rate ◽  
Policy Practice ◽  
Participant Group

SYNOPSIS U.S. corporations have the ability to avoid paying domestic taxes to achieve an effective tax rate that is much lower than the statutory federal tax rate. This study evaluates the extent that individuals differ in their attitudes about the ethicality of corporations avoiding domestic taxes to achieve low effective tax rates. We also examine the extent to which the specific tax avoidance method used by corporations to access a low effective tax rate affects perceived ethicality. Eighty-two members of the general public and 112 accountants participated in an experiment with two participant groups and three tax avoidance methods manipulated randomly between subjects. The results indicate a significant interaction between participant group and tax avoidance method, with the general public considering shifting profits out of the country to achieve a low effective tax rate to be highly unethical, while the accountants find tax avoidance from carrying forward prior operating losses to be highly ethical. Further, mediation analysis indicates that perceived fairness and legality mediate the effects of participant type on perceived ethicality. Mediation analysis also reveals that sense of fairness and legality mediate the link between tax avoidance method and perceived ethicality. We conclude by considering the study's policy, practice, and research implications.

Taxation in a mixed economy: the case of China

2017 ◽  
Vol 34 (1) ◽  
pp. 49-61 ◽  
Author(s):  
Davidson Sinclair ◽  
Larry Li
Keyword(s):  
Income Tax ◽  
Central Government ◽  
Corporate Income Tax ◽  
Tax Rates ◽  
Government Ownership ◽  
Effective Tax Rate ◽  
Effective Tax Rates ◽  
Content Type ◽  
Tax Rate ◽  
For Profit

Purpose The purpose of this paper is to investigate how Chinese firms’ ownership structure is related to their effective tax rate. The People’s Republic of China provides an interesting environment to examine the corporate income tax. Government has significant ownership stakes in the for-profit economy and state-owned enterprises (SOEs) are liable to the corporate income tax. This is very different to most other economies where SOE tends to dominate the not-for-profit economy and pays no corporate income tax. Government ownership also varies between the central government and local government in addition to state asset management bureaus. This provides a rich institutional background to examining the corporate income tax. Design/methodology/approach A panel data analysis approach is used to examine relationship between ownership structure and effective tax rates of all public firms in China from 1999 to 2009. Findings The authors report that effective tax rates do appear to vary across the ownership types, but that SOEs pay a statistically higher effective tax rate than to non-state-owned. In addition, local government owned SOE pay higher effective tax rates than central government and SAMB owned SOE. The authors also investigate Zimmerman’s (1983) political cost hypothesis. Unfortunately, these results are econometrically fragile with the statistical significance of those results varying by empirical technique. Originality/value This paper provides insight into government ownership and taxation in China.

Strategic Choice of Presentation Format: The Case of ETR Reconciliations

2021 ◽  
Author(s):  
Roman Chychyla ◽  
Diana Falsetta ◽  
Sundaresh Ramnath
Keyword(s):  
Income Tax ◽  
Strategic Choice ◽  
Presentation Format ◽  
Tax Rates ◽  
Effective Tax Rate ◽  
Effective Tax Rates ◽  
Tax Rate ◽  
Explicit Mention ◽  
Disclosure Strategy ◽  
Minimize Costs

To minimize costs related to unfavorable perceptions of their tax-related activities, firms with low effective tax rates (ETR) could avoid, where possible, explicit mentions of their effective tax rates. Using this reputational cost perspective we study an item of required disclosure in the income tax footnote of the 10-K, the ETR reconciliation table, where firms can choose a presentation format that reveals the tax rate (the percentage format) or one that avoids explicit mention of the effective tax rate (the dollar format). We find that firms with low ETRs are 24 percent more likely to use the dollar format, and are also less likely to mention their tax rates elsewhere in their disclosures, consistent with the choice of dollar format reflecting a firm's overall tax disclosure strategy. Analysts' tax expense forecasts are less accurate for dollar format firms, suggesting higher processing costs associated with tax-related disclosures for these firms.

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