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Who participates in corporate income tax consolidation? Evidence from Japan


  • Kazuki Onji


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.

Suggested Citation

  • Kazuki Onji, 2013. "Who participates in corporate income tax consolidation? Evidence from Japan," AJRC Working Papers 1303, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:csg:ajrcwp:1303

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    References listed on IDEAS

    1. Eichner, Thomas & Runkel, Marco, 2011. "Corporate income taxation of multinationals in a general equilibrium model," Journal of Public Economics, Elsevier, vol. 95(7), pages 723-733.
    2. Onji Kazuki & Vera David, 2010. "Tax Law Asymmetries and Income Shifting: Evidence from Japanese Capital Keiretsu," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-35, January.
    3. Mintz, Jack & Smart, Michael, 2004. "Income shifting, investment, and tax competition: theory and evidence from provincial taxation in Canada," Journal of Public Economics, Elsevier, vol. 88(6), pages 1149-1168, June.
    4. Buettner, Thiess & Riedel, Nadine & Runkel, Marco, 2011. "Strategic Consolidation Under Formula Apportionment," National Tax Journal, National Tax Association, vol. 64(2), pages 225-254, June.
    5. Michael P. Devereux & Simon Loretz, 2008. "The Effects of EU Formula Apportionment on Corporate Tax Revenues," Fiscal Studies, Institute for Fiscal Studies, vol. 29(1), pages 1-33, March.
    6. Jack Mintz, 2004. "Corporate Tax Harmonization in Europe: It's All About Compliance," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 11(2), pages 221-234, March.
    7. 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;Academy of International Business, vol. 36(4), pages 398-414, July.
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    Cited by:

    1. Masanori Orihara, "undated". "Corporate tax asymmetries and R&D: Evidence from a tax reform for business groups in Japan," Discussion papers ron273, Policy Research Institute, Ministry of Finance Japan.
    2. Masanori Orihara, 2013. "Business Group Taxation and R&D Activities," Discussion papers ron254, Policy Research Institute, Ministry of Finance Japan.

    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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