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Who participates in corporate income tax consolidation? Evidence from Japan

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  • Kazuki Onji

Abstract

When a group of affiliated corporations have the option to file a single tax return based on a combined income, what types of groups would take up the option? This study empirically analyses decisions to participate in a single-jurisdiction consolidated tax filing. The data consists of 2,782 Japanese corporate groups headed by publicly-traded corporations observed over 2002-2007. Results indicate higher likelihood of participation among groups characterised by low correlation in returns among group members, high variance in returns, large number of subsidiaries, and losses accumulated in parents. The significant influence of variance and covariance of returns suggests that a consolidation scheme improves the efficiency of corporate income tax through reducing profit shifting.

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File URL: https://crawford.anu.edu.au/pdf/ajrc/wpapers/2013/201303.pdf
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Bibliographic Info

Paper provided by Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University in its series AJRC Working Papers with number 1303.

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Length: 36 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:csg:ajrcwp:1303

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Keywords: corporate group; profit shifting; survival analysis;

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References

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  1. Thomas Eichner & Marco Runkel, 2008. "Corporate Income Taxation of Multinationals in a General Equilibrium Model," CESifo Working Paper Series 2320, CESifo Group Munich.
  2. Michael P Devereux & Simon Loretz, 2007. "The Effects of EU Formula Apportionment on Corporate Tax Revenues," Working Papers 0706, Oxford University Centre for Business Taxation.
  3. Lorraine Eden & Luis F Juarez Valdez & Dan Li, 2005. "Talk softly but carry a big stick: transfer pricing penalties and the market valuation of Japanese multinationals in the United States," Journal of International Business Studies, Palgrave Macmillan, vol. 36(4), pages 398-414, July.
  4. Thiess Buettner & Nadine Riedel & Marco Runkel, 2008. "Strategic Consolidation under Formula Apportionment," Working Papers 0827, Oxford University Centre for Business Taxation.
  5. Jack Mintz, 2004. "Corporate Tax Harmonization in Europe: It's All About Compliance," International Tax and Public Finance, Springer, vol. 11(2), pages 221-234, 03.
  6. Jack Mintz & Michael Smart, 2001. "Income Shifting, Investment, and Tax Competition: Theory and Evidence from Provincial Taxation in Canada," CESifo Working Paper Series 554, CESifo Group Munich.
  7. Kazuki Onji & David Vera, 2008. "Tax Law Asymmetries and Income Shifting : Evidence From Japanese Capital Keiretsu," Finance Working Papers 21966, East Asian Bureau of Economic Research.
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Cited by:
  1. Masanori Orihara, 2013. "Business Group Taxation and R&D Activities," Discussion papers ron254, Policy Research Institute, Ministry of Finance Japan.

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