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Tax Consolidation And The Structure Of Corporate Groups: Evidence From The Japanese Tax Reform 2002


  • Kazuki Onji


A consolidated filing of corporate income tax may induce firms to manipulate ownership interests in subsidiaries but no study has systematically examined such behavioral responses. This paper examines empirically inclusions/exclusions of subsidiaries to/from consolidation groups in a quasi-experiment that utilizes the Japanese tax reform of 2002. The identification of tax effects is based on a difference-in-difference strategy that exploits disincentives to consolidate subsidiaries with losses carried forward. The data consists of 37,000-40,000 subsidiary-time observations spanning biennially over 1988-2006. The result shows that losses carried forward significantly reduced the propensity to include subsidiaries to consolidation groups. No evidence on tax-motivated exclusion is found. This result suggests that the forced consolidation regime is preferable.

Suggested Citation

  • Kazuki Onji, 2011. "Tax Consolidation And The Structure Of Corporate Groups: Evidence From The Japanese Tax Reform 2002," Asia Pacific Economic Papers 394, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:csg:ajrcau:394

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    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. Crawford School Working Papers in December 2011
      by David Stern in Stochastic Trend on 2012-01-03 06:04:00

    More about this item

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law

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