scholarly journals Managing Annual Accounting Reports to Avoid State Taxes: An Analysis of Property-Casualty Insurers

1999 ◽  
Vol 74 (3) ◽  
pp. 371-393 ◽  
Author(s):  
Kathy R. Petroni ◽  
Douglas A. Shackelford
Keyword(s):  
State Government ◽  
State Level ◽  
Income Shifting ◽  
Tax Rates ◽  
Firm Level ◽  
Level Data ◽  
State Tax ◽  
Total State ◽  
State Taxes ◽  
Accounting Reports

We hypothesize that, in their annual accounting reports, propertycasualty insurers allocate premiums from multistate policies to reduce total state taxes. To test this prediction, we exploit the industry's unique state tax disclosures. We examine firm-level data, collected from the publicly available, statutory reports filed with each state government. Reported premiums at the insurer-state level, scaled by incurred losses, are regressed on state tax measures. Consistent with tax-motivated income shifting, we find the premiumloss ratio is decreasing in state tax rates. The negative relation is greatest for insurers specializing in multistate lines of business.

Implicit Taxes Amid Race to the Bottom in a Global Tax Game

2020 ◽  
Vol 27 (2) ◽  
pp. 42
Author(s):  
Igor Semenenko ◽  
Junwook Yoo ◽  
Parporn Akathaporn
Keyword(s):  
Capital Mobility ◽  
Tax Rates ◽  
Corporate Tax ◽  
Firm Level ◽  
Race To The Bottom ◽  
Tax Subsidy ◽  
Tax Subsidies ◽  
Level Data ◽  
Tax Returns ◽  
Tax Hypothesis

Growing tax competition among national governments in the presence of capital mobility distorts equilibrium in the international corporate tax market. This paper is related to the literature that examines impact of international tax policies on corporate accounting statements. Employing international firm-level data, this study revisits the race-to-the-bottom hypothesis and documents that tax exemptions lowering effective tax rates relative to statutory rates increase pre-tax returns. This finding directly contradicts the implicit tax hypothesis documented by Wilkie (1992), who provided empirical evidence on inverse relationship between pre-tax return and tax subsidy. We also find evidences that relative importance of permanent versus timing component depends on the geography and that decline in corporate tax rates reduces impact of tax subsidies on profitability. Our findings suggest that tax subsidies play a different role than in 1968-1985, which was examined by Wilkie (1992). These results are consistent with the race-to-the-bottom hypothesis and income shifting explanation

Implicit Corporate Taxes and Income Shifting

2019 ◽  
Vol 95 (3) ◽  
pp. 315-342 ◽  
Author(s):  
Kevin S. Markle ◽  
Lillian F. Mills ◽  
Braden Williams
Keyword(s):  
Multinational Firm ◽  
Income Shifting ◽  
Tax Rates ◽  
Positive Relation ◽  
Firm Level ◽  
Tax Rate ◽  
Closed Economies ◽  
Country Level ◽  
Tax Effects ◽  
Robust Evidence

ABSTRACT The effects of tax rate changes on corporate profitability are not fully understood. Implicit tax theory predicts a positive relation between country-level tax rates and firm-level pretax returns. Conversely, income shifting should make reported pretax returns inversely related to tax rates. Among single-country European firms, we find robust evidence of corporate implicit taxes following tax rate changes, concentrated in firms that rely less on intangible assets and firms in closed economies (non-EU countries). Among multinational firm affiliates, we find the effects of income shifting outweigh the effects of implicit taxes for firms with high intangibles and in countries with open borders. Our results imply income shifting estimated using only reported profits is less biased by implicit taxes in settings with open economies and firms with unique inputs or products. Our evidence also helps explain prior evidence of decreasing corporate implicit tax effects over time, particularly for multinationals.

Effects of Unitary vs. Nonunitary State Income Taxes on Interstate Resource Allocation: Some Analytical and Simulation Results

2001 ◽  
Vol 23 (1) ◽  
pp. 39-60 ◽  
Author(s):  
Michael G. Williams ◽  
Charles W. Swenson ◽  
Terry L. Lease
Keyword(s):  
State Government ◽  
Income Taxes ◽  
Tax Credits ◽  
Tax Revenue ◽  
Tax Rates ◽  
Tax Rate ◽  
Unitary State ◽  
State Tax ◽  
State Income ◽  
Tax Structures

This study examines the optimal location choice decisions of a two-state firm in response to changing state corporate income tax rates and tax structures. Because the firm can engineer its tax liability by manipulating between-state location of sales, property, and payroll, changes in relative state tax rates should result in the firm making such location changes. Results of a model firm simulation, examining various combinations of state tax rates and unitary vs. nonunitary tax structures, found that the firm would make interstate resource changes to minimize company-wide state income taxes. Important findings of the study are that tax rate changes in nonunitary states may cause little or no change in resources used in that state. Indeed, in one scenario, the resulting resource flows from a tax increase are favorable to the nonunitary state, making a tax increase a win-win situation for the state government (higher tax revenue and more economic activity). In contrast, changes in unitary state tax rates can result in significant resource changes in both the unitary state and in other states. The finding that tax rate cuts are ineffective in nonunitary states implies that these states may be more successful in attracting investment by changes affecting apportionment factors (tax credits for new capital, or new jobs) or by use of nontax incentives.

scholarly journals Budgetary Impacts of Central Fiscal Transfers in India: Evidence from State Level Data

2018 ◽  
Vol 4 (02) ◽  
Author(s):  
Prasant Kumar Panda
Keyword(s):  
State Level ◽  
Dynamic Panel ◽  
Indian States ◽  
Data Set ◽  
Fiscal Transfers ◽  
Lump Sum ◽  
Time Period ◽  
Level Data ◽  
State Tax ◽  
Affect States

The paper empirically examines the impacts of federal transfers on State tax efforts and expenditure taking into consideration a panel data set of 22 Indian States for the time-period 1980-81 to 2007-08. Dynamic panel equations are specified and system GMM estimation techniques are adopted to obtain the regression coefficients. The results suggest that federal transfers have adverse incentives on budgetary initiatives of States in mobilizing their own tax resources and regulating expenditure. Federal transfers as a whole adversely affect states Tax-GSDP ratio and per capita own tax revenues. Similarly, federal transfers have important influence on the size and pattern of States spending. All categories of States expenditure like revenue expenditure, capital disbursements and aggregate expenditure are stimulated by the large availability of Central transfers. Expenditure impact of transfers is more realised on revenue expenditure than capital disbursements. The author calls for review of existing design of transfers and criteria, proper assessment of non-plan revenue deficit grants, review of ratio of specific transfers to lump-sum transfers and increasing the scope of formula based transfers to handle adverse budgetary incentives of federal transfers.

scholarly journals Implicit Taxes Amid Race to the Bottom in a Global Tax Game

2020 ◽  
Vol 27 (1) ◽  
pp. 44
Author(s):  
Igor Semenenko ◽  
Junwook Yoo ◽  
Parporn Akathaporn
Keyword(s):  
Capital Mobility ◽  
Tax Rates ◽  
Corporate Tax ◽  
Firm Level ◽  
Race To The Bottom ◽  
Tax Subsidy ◽  
Tax Subsidies ◽  
Level Data ◽  
Tax Returns ◽  
Tax Hypothesis

Growing tax competition among national governments in the presence of capital mobility distorts equilibrium in the international corporate tax market. This paper is related to the literature that examines impact of international tax policies on corporate accounting statements. Employing international firm-level data, this study revisits the race-to-the-bottom hypothesis and documents that tax exemptions lowering effective tax rates relative to statutory rates increase pre-tax returns. This finding directly contradicts the implicit tax hypothesis documented by Wilkie (1992), who provided empirical evidence on inverse relationship between pre-tax return and tax subsidy. We also find evidences that relative importance of permanent versus timing component depends on the geography and that decline in corporate tax rates reduces impact of tax subsidies on profitability. Our findings suggest that tax subsidies play a different role than in 1968-1985, which was examined by Wilkie (1992). These results are consistent with the race-to-the-bottom hypothesis and income shifting explanation

scholarly journals US State Fiscal Policy and Natural Resources

2015 ◽  
Vol 7 (3) ◽  
pp. 238-257 ◽  
Author(s):  
Alexander James
Keyword(s):  
Fiscal Policy ◽  
Natural Resources ◽  
Fixed Effects ◽  
State Level ◽  
Analytical Framework ◽  
Government Revenue ◽  
Tax Rates ◽  
Fixed Effects Model ◽  
Level Data ◽  
State Fiscal Policy

An analytical framework predicts that, in response to an exogenous increase in resource-based government revenue, a benevolent government will partially substitute away from taxing income, increase spending and save. Fifty-one years of US-state level data are largely consistent with this theory. A baseline fixed effects model predicts that a $1.00 increase in resource revenue results in a $0.25 decrease in nonresource revenue, a $0.43 increase in spending and a $0.32 increase in savings. Instrumenting for resource revenue reveals that a positive revenue shock is largely saved and the rest is transferred back to residents in the form of lower nonresource tax rates. (JEL H71, H72, H76, Q38, R11)

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