IDEAS home Printed from https://ideas.repec.org/a/eee/accoun/v47y2012i2p155-167.html
   My bibliography  Save this article

Are Multinational Corporate Tax Rules as Important as Tax Rates?

Author

Listed:
  • Lee, Namryoung
  • Swenson, Charles

Abstract

Previous research has documented the influence of statutory tax rates on international firms' effective tax rates, or ETRs. We add to this body of research by examining common factors of the income tax base, which affects ETRs. Specifically, this study examines the determinants of effective tax rates for publicly traded companies based in European Union (EU) countries. The time period examined is after 2004, when all EU firms were required to use standardized accounting principles under International Financial Reporting Standards (IFRS). We find that, across EU countries, such factors are relatively consistent with factors found in studies of U.S. companies' effective tax rates, which include inventory, leverage, depreciation tax shield, and R&D intensity. We also find that the presence of country book-tax conformity rules increases effective rates. Importantly, our finding that such tax base (or rule) effects are at least as important as rate effects adds to the international debate about uneven tax structures around the globe.

Suggested Citation

  • Lee, Namryoung & Swenson, Charles, 2012. "Are Multinational Corporate Tax Rules as Important as Tax Rates?," The International Journal of Accounting, Elsevier, vol. 47(2), pages 155-167.
    • Handle: RePEc:eee:accoun:v:47:y:2012:i:2:p:155-167
    DOI: 10.1016/j.intacc.2012.03.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0020706312000362
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.intacc.2012.03.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Julie Collins & Douglas Shackelford, 1995. "Corporate domicile and average effective tax rates: The cases of Canada, Japan, the United Kingdom, and the United States," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 2(1), pages 55-83, February.
    2. Bartelsman, Eric J. & Beetsma, Roel M. W. J., 2003. "Why pay more? Corporate tax avoidance through transfer pricing in OECD countries," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2225-2252, September.
    3. Bretschger, Lucas & Hettich, Frank, 2002. "Globalisation, capital mobility and tax competition: theory and evidence for OECD countries," European Journal of Political Economy, Elsevier, vol. 18(4), pages 695-716, November.
    4. Gupta, Sanjay & Newberry, Kaye, 1997. "Determinants of the variability in corporate effective tax rates: Evidence from longitudinal data," Journal of Accounting and Public Policy, Elsevier, vol. 16(1), pages 1-34.
    5. Roger Gordon & Laura Kalambokidis & Joel Slemrod, 2003. "A New Summary Measure of the Effective Tax Rate on Investment," NBER Working Papers 9535, National Bureau of Economic Research, Inc.
    6. Slemrod, Joel, 2004. "Are corporate tax rates, or countries, converging?," Journal of Public Economics, Elsevier, vol. 88(6), pages 1169-1186, June.
    7. Kevin S. Markle & Douglas Shackelford, 2009. "Do Multinationals or Domestic Firms Face Higher Effective Tax Rates?," NBER Working Papers 15091, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Luca Menicacci, 2022. "Financial reporting and book-tax conformity: A review of the issues," FINANCIAL REPORTING, FrancoAngeli Editore, vol. 2022(1), pages 41-77.
    2. Tânia Menezes Montenegro, 2021. "Tax Evasion, Corporate Social Responsibility and National Governance: A Country-Level Study," Sustainability, MDPI, vol. 13(20), pages 1-19, October.
    3. Jaafar, Aziz & Thornton, John, 2015. "Tax Havens and Effective Tax Rates: An Analysis of Private versus Public European Firms," The International Journal of Accounting, Elsevier, vol. 50(4), pages 435-457.
    4. Belz, Thomas & von Hagen, Dominik & Steffens, Christian, 2019. "Taxes and firm size: Political cost or political power?," Journal of Accounting Literature, Elsevier, vol. 42(C), pages 1-28.
    5. Yang, Jingwen & Hemmings, Danial & Jaafar, Aziz & Jackson, Richard H.G., 2022. "The real earnings management gap between private and public firms: Evidence from Europe," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 49(C).
    6. Fernández-Rodríguez, Elena & García-Fernández, Roberto & Martínez-Arias, Antonio, 2023. "Institutional determinants of the effective tax rate in G7 and BRIC countries," Economic Systems, Elsevier, vol. 47(2).
    7. Hoppe, Thomas & Schanz, Deborah & Sturm, Susann & Sureth, Caren & Voget, Johannes, 2020. "The relation between tax complexity and foreign direct investment: Evidence across countries," arqus Discussion Papers in Quantitative Tax Research 250, arqus - Arbeitskreis Quantitative Steuerlehre.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michael P Devereux, 2007. "Taxes in the EU New Member States and the Location of Capital and Profit," Working Papers 0703, Oxford University Centre for Business Taxation.
    2. Fernando M. M. Ruiz, 2006. "Convergence de l'impôt sur les sociétés dans l'Union E uropéenne," Economie & Prévision, La Documentation Française, vol. 0(2), pages 79-96.
    3. Markle, Kevin S. & Shackelford, Douglas A., 2012. "Cross-Country Comparisons of Corporate Income Taxes," National Tax Journal, National Tax Association;National Tax Journal, vol. 65(3), pages 493-527, September.
    4. Markus Leibrecht & Claudia Hochgatterer, 2012. "Tax Competition As A Cause Of Falling Corporate Income Tax Rates: A Survey Of Empirical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 26(4), pages 616-648, September.
    5. Clausing Kimberly A, 2008. "Closer Economic Integration and Corporate Tax Systems," Global Economy Journal, De Gruyter, vol. 8(2), pages 1-30, June.
    6. Cooper, Maggie & Nguyen, Quyen T.K., 2020. "Multinational enterprises and corporate tax planning: A review of literature and suggestions for a future research agenda," International Business Review, Elsevier, vol. 29(3).
    7. Lee, Namryoung & Swenson, Charles, 2016. "Effects of overseas subsidiaries on worldwide corporate taxes," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 26(C), pages 47-59.
    8. Arnt Ove Hopland & Petro Lisowsky & Mohammed Mardan & Dirk Schindler, 2014. "Income Shifting under Losses," CESifo Working Paper Series 5130, CESifo.
    9. Florence Lachet-Touya, 2016. "EU tax competition and tax avoidance: A multiprincipal perspective," Working papers of CATT hal-02939340, HAL.
    10. Andreas Haufler & Alexander Klemm & Guttorm Schjelderup, 2006. "Economic Integration and Redistributive Taxation: A Simple Model with Ambiguous Results," CESifo Working Paper Series 1853, CESifo.
    11. Chen, Yang & Regis, Paulo José, 2014. "Strategic interactions in corporate tax between Chinese local governments," RIEI Working Papers 2014-01, Xi'an Jiaotong-Liverpool University, Research Institute for Economic Integration, revised 27 Oct 2015.
    12. Julien Martin, 2018. "Planification fiscale des sociétés québécoises et recours aux paradis fiscaux," CIRANO Project Reports 2018rp-20, CIRANO.
    13. Nadja Dwenger & Viktor Steiner, 2008. "Effective Profit Taxation and the Elasticity of the Corporate Income Tax Base: Evidence from German Corporate Tax Return Data," Discussion Papers of DIW Berlin 829, DIW Berlin, German Institute for Economic Research.
    14. Marijana Bubaniæ, 2023. "Linear determinants of the effective tax burden of ICT companies in the Republic of Croatia," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 41(2), pages 391-425.
    15. Subagio Efendi & Salim Darmadi & Robert Czernkowski, 2022. "Are Financial Institutions Tax Aggressive? Evidence From Corporate Tax Return Data," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 25(2), pages 175-204, August.
    16. Miniaci Raffaele & Panteghini Paolo M. & Rivolta Giulia, 2022. "The estimation of reaction functions under tax competition," German Economic Review, De Gruyter, vol. 23(2), pages 301-339, May.
    17. Andreas Haufler, 2007. "Sollen multinationale Unternehmen weniger Steuern bezahlen?," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 76(2), pages 8-20.
    18. Andreas Haufler & Alexander Klemm & Guttorm Schjelderup, 2009. "Economic integration and the relationship between profit and wage taxes," Public Choice, Springer, vol. 138(3), pages 423-446, March.
    19. Cooper, Maggie & Nguyen, Quyen T.K., 2019. "Understanding the interaction of motivation and opportunity for tax planning inside US multinationals: A qualitative study," Journal of World Business, Elsevier, vol. 54(6), pages 1-1.
    20. Apergis, Nicholas & Cooray, Arusha, 2014. "Tax revenues convergence across ASEAN, Pacific and Oceania countries: Evidence from club convergence," Journal of Multinational Financial Management, Elsevier, vol. 27(C), pages 11-21.

    More about this item

    Keywords

    Tax avoidance; Multinational taxation;

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:accoun:v:47:y:2012:i:2:p:155-167. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620179 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.