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Cross-Country Comparisons Of Corporate Income Taxes

  • Markle, Kevin S.
  • Shackelford, Douglas A.
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    We use publicly available financial statement information for 11,602 public corporations from 82 countries from 1988–2009 in an attempt to isolate the impact of domicile on corporate taxes. We find that the country in which the parent of a multinational is located and to a lesser extent its subsidiaries are located substantially affects its worldwide effective tax rate (ETR). Japanese firms always face the highest ETRs. U.S. multinationals are among the highest taxed. Multinationals based in tax havens face the lowest taxes. We find that ETRs have been falling over the last two decades; however, the ordinal rank from high-tax countries to low-tax countries has changed little. We also find little difference between the ETRs of multinationals and domestic-only firms. Besides enhancing our knowledge about international taxes, these findings should provide some empirical underpinning for ongoing policy debates about the taxation of multinationals.

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    Article provided by National Tax Association in its journal National Tax Journal.

    Volume (Year): 65 (2012)
    Issue (Month): 3 (September)
    Pages: 493-527

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    Handle: RePEc:ntj:journl:v:65:y:2012:i:3:p:493-527
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    1. Hanlon, Michelle & Heitzman, Shane, 2010. "A review of tax research," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 127-178, December.
    2. Desai, Mihir A. & Foley, C. Fritz & Hines, James Jr., 2006. "The demand for tax haven operations," Journal of Public Economics, Elsevier, vol. 90(3), pages 513-531, February.
    3. 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.
    4. John Graham & Jana Raedy & Douglas Shackelford, 2010. "Research in Accounting for Income Taxes," NBER Working Papers 15665, National Bureau of Economic Research, Inc.
    5. Hanlon, Michelle, 2003. "What Can We Infer about a Firm’s Taxable Income from Its Financial Statements?," National Tax Journal, National Tax Association, vol. 56(4), pages 831-63, December.
    6. John R. Graham & Lillian F. Mills, 2007. "Using Tax Return Data to Simulate Corporate Marginal Tax Rates," NBER Working Papers 13709, National Bureau of Economic Research, Inc.
    7. Zimmerman, Jerold L., 1983. "Taxes and firm size," Journal of Accounting and Economics, Elsevier, vol. 5(1), pages 119-149, April.
    8. 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.
    9. John H. Mutti & Harry Grubert, 2007. "The Effect of Taxes on Royalties and the Migration of Intangible Assets Abroad," NBER Working Papers 13248, National Bureau of Economic Research, Inc.
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