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Multinational Corporations´ Effective Tax Rates: Evidence from Orbis

Author

Listed:
  • Javier Garcia-Bernardo

    (University of Amsterdam, Faculty of Social and Behavioural Sciences, Spui 21, 1012 WX Amsterdam, The Netherlands)

  • Petr Jansky

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic)

  • Thomas Torslov

    (Faculty of Social Sciences, Oster Farimagsgade 5, DK-1353 Copenhagen K, Denmark)

Abstract

Effective tax rates (ETRs) estimated from the balance sheet data of multinational corporations (MNCs) are useful for comparing MNCs´ corporate income taxation across countries. In this paper we propose a new methodological approach to estimate ETRs as reliably and as for as many countries as possible using Orbis´ unconsolidated data for the 2011-2015 period. We focus on countries with at least 50 available companies, which results in a sample of 50, mostly European, countries. We estimate the ETR of a country as the ratio of corporate income tax to gross income for all affiliates of MNCs in that country, weighted by gross income. We propose four ETR estimations, including lower and upper bounds, which differ by gross income calculation. We find that ETRs substantially differ from statutory rates for some countries. For example, we show that despite similar statutory rates of 28% and 29%, MNCs in Luxembourg paid as little as 1-8% of gross income in taxes while those in Norway paid as much as 45-66%. Despite being the best available, existing data is still imperfect, and we therefore call for better data in the form of MNCs´ unconsolidated, public country-by-country reporting data.

Suggested Citation

  • Javier Garcia-Bernardo & Petr Jansky & Thomas Torslov, 2020. "Multinational Corporations´ Effective Tax Rates: Evidence from Orbis," Working Papers IES 2020/20, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jun 2020.
    • Handle: RePEc:fau:wpaper:wp2020_20
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    File URL: https://ies.fsv.cuni.cz/en/veda-vyzkum/working-paper
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    Citations

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    Cited by:

    1. Javier Garcia-Bernardo & Petr Janský & Thomas Tørsløv, 2021. "Multinational corporations and tax havens: evidence from country-by-country reporting," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(6), pages 1519-1561, December.
    2. Garcia-Bernardo, Javier & Janský, Petr, 2024. "Profit shifting of multinational corporations worldwide," World Development, Elsevier, vol. 177(C).
    3. Dutt, Verena K. & Nicolay, Katharina & Spengel, Christoph, 2021. "Reporting behavior and transparency in European banks' country-by-country reports," ZEW Discussion Papers 21-019, ZEW - Leibniz Centre for European Economic Research.
    4. Javier Garcia-Bernardo & Petr Janský & Thomas Tørsløv, 2022. "Decomposing Multinational Corporations’ Declining Effective Tax Rates," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 70(2), pages 338-381, June.

    More about this item

    Keywords

    Effective tax rate; multinational corporation; foreign direct investment; profit shifting; tax haven; tax competition;
    All these keywords.

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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