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Tax avoidance over time: A comparison of European and U.S. firms

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  • Thomsen, Martin
  • Watrin, Christoph

Abstract

In recent years, the international tax policy debate has focused on the tax avoidance strategies applied by multinational firms. We investigate whether differences can be observed over time between the tax avoidance behaviors of U.S. firms and those of firms from 12 European countries. Our results show that the mean effective tax rate (ETR) of U.S. firms and that of firms in large European countries, such as France and Germany, are similar. Additionally, we investigate whether changes in statutory tax rates (STRs) explain the declining ETRs of European firms. In contrast to observations for the U.S., we find that the gap between the STR and the ETR significantly decreases over time for EU firms. This finding suggests that tax avoidance in EU firms may have, on average, decreased over time.

Suggested Citation

  • Thomsen, Martin & Watrin, Christoph, 2018. "Tax avoidance over time: A comparison of European and U.S. firms," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 33(C), pages 40-63.
    • Handle: RePEc:eee:jiaata:v:33:y:2018:i:c:p:40-63
    DOI: 10.1016/j.intaccaudtax.2018.11.002
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    13. 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.
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    17. Huber, Hans-Peter & Maiterth, Ralf, 2019. "Steuerbelastung deutscher Kapitalgesellschaften von lediglich 20 % - Fakt oder Fake News?," arqus Discussion Papers in Quantitative Tax Research 246, arqus - Arbeitskreis Quantitative Steuerlehre.
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    More about this item

    Keywords

    Tax avoidance; Effective tax rate; Statutory tax rate;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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