Jurisdictions with lowest effective tax rates in the post-BEPS landscape - CbCR evidence and implications.

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.

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An Examination of Reputational Costs and Tax Avoidance: Evidence from Firms with Valuable Consumer Brands

Journal of the American Taxation Association ◽

10.2308/atax-51634 ◽

2017 ◽

Vol 39 (1) ◽

pp. 67-93 ◽

Cited By ~ 52

Author(s):

Chelsea Rae Austin ◽

Ryan J. Wilson

Keyword(s):

Tax Avoidance ◽

Tax Rates ◽

Effective Tax Rates ◽

Reputational Costs

ABSTRACT We expect firms with the greatest exposure to reputational damage among consumers will engage in lower levels of tax avoidance to minimize unwanted scrutiny that could impair the firms' reputation. We identify a set of firms with valuable consumer reputation using Harris Interactive's EquiTrend survey, which surveys consumers about their perceptions of valuable and prominent brands. We find evidence in support of our hypothesis that firms with valuable brands will engage in less tax avoidance. Specifically, we find a positive and significant association between our measure of reputation and both the GAAP and cash effective tax rates (measured over one and three years). We find mixed evidence on whether there is a negative and significant association between reputation and the probability the firm is engaging in tax sheltering.

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A Model of Multinational Income Shifting and an Application to Tax Planning with E-Commerce

Journal of the American Taxation Association ◽

10.2308/atax-50817 ◽

2014 ◽

Vol 36 (2) ◽

pp. 27-53 ◽

Cited By ~ 18

Author(s):

Kenneth J. Klassen ◽

Stacie K. Laplante ◽

Carla Carnaghan

Keyword(s):

Tax Planning ◽

Investment Model ◽

Income Shifting ◽

Tax Rates ◽

Foreign Investments ◽

Effective Tax Rates ◽

Tax Rate ◽

Foreign Earnings ◽

Joint Consideration ◽

The U.S

ABSTRACT: This manuscript develops an investment model that incorporates the joint consideration of income shifting by multinational parents to or from a foreign subsidiary and the decision to repatriate or reinvest foreign earnings. The model demonstrates that, while there is always an incentive to shift income into the U.S. from high-foreign-tax-rate subsidiaries, income shifting out of the U.S. to low-tax-rate countries occurs only under certain conditions. The model explicitly shows how the firms' required rate of return for foreign investments affects both repatriation and income shifting decisions. We show how the model can be used to refine extant research. We then apply it to a novel setting—using e-commerce for tax planning. We find firms in manufacturing industries with high levels of e-commerce have economically significant lower cash effective tax rates. This effect is magnified for firms that are less likely to have taxable repatriations. JEL Classifications: G38, H25, H32, M41.

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EFFECTIVE TAX RATES FROM FINANCIAL STATEMENTS

National Tax Journal ◽

10.1086/ntj41792191 ◽

1986 ◽

Vol 39 (3) ◽

pp. 293-306

Author(s):

GILLIAN M. SPOONER

Keyword(s):

Financial Statements ◽

Tax Rates ◽

Effective Tax Rates

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Investigating the impact of country-by-country reporting on effective tax rates: Exploratory evidence from listed South African multinational groups

South African Journal of Accounting Research ◽

10.1080/10291954.2020.1860483 ◽

2021 ◽

pp. 1-12

Author(s):

Cara Thiart

Keyword(s):

South African ◽

Tax Rates ◽

Effective Tax Rates ◽

The Impact

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Taxation in a mixed economy: the case of China

Studies in Economics and Finance ◽

10.1108/sef-08-2015-0183 ◽

2017 ◽

Vol 34 (1) ◽

pp. 49-61 ◽

Cited By ~ 2

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.

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Taxes and Haven Activities: Evidence from Linguistic Cues

The Accounting Review ◽

10.2308/tar-2020-0163 ◽

2021 ◽

Author(s):

Kelvin K. F. Law ◽

Lillian Mills

Keyword(s):

Tax Rates ◽

Economic Activities ◽

Effective Tax Rates ◽

Tax Effects ◽

Tax Haven ◽

Linguistic Cues ◽

Different Types ◽

Information Set ◽

Mere Existence ◽

Offshore Activities

Users of Exhibit 21 cannot tell whether a tax haven subsidiary is actively operating or a dormant shell company. In this paper, we develop a new set of parsimonious measures to highlight the distinct mechanisms and tax effects of offshore sales to, as opposed to purchases from, tax haven countries, offering insights on the effects of certain types of offshoring activities on firms’ tax burdens. Our main measure has about three times the effect of the mere existence of a haven subsidiary in explaining firms’ effective tax rates. We detail the processes to predict the offshore activities in tax haven countries for firms without an Exhibit 21 and firms reporting no subsidiary operations in a tax haven country. Relative to the mere mention of a tax haven subsidiary in Exhibit 21, our new measures provide a richer information set to capture different types of economic activities in tax haven countries.

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