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Corporate Effective Tax Rates in Asian Countries

  • Masaaki Suzuki

    ()

    (The Research Center for Advanced Policy Studies, Institute of Economic Research, Kyoto University)

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    This paper aims to (a) calculate Devereux and Griffith’s (2003) forward-looking effective tax rates for 12 Asian countries over a span of 30 years, (b) show the impact of tax holidays on the effective tax rate in Asian countries, and (c) empirically explore the possibility of tax competition among Asian countries. Through relevant analyses, I arrive at three key conclusions. First, while small countries with little rent in domestic markets set their effective tax rates at almost zero, large countries maintain much higher effective tax rates. Second, for countries that have generous capital allowance systems, tax holidays may lead to a rise in not only the effective marginal tax rates (EMTR), but also the effective average tax rates (EATR). Third, some Asian countries may engage in tax competition, at least over the EATR, for a limited period of time. However, while some countries have raised their effective tax rates in recent years, others have continued with tax reductions. These results indicate that the recent tax interactions among Asian countries differ from the simpler interactions seen among the European countries.

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    File URL: http://www.kier.kyoto-u.ac.jp/DP/DP875.pdf
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    Paper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 875.

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    Length: 43pages
    Date of creation: Jul 2013
    Date of revision:
    Handle: RePEc:kyo:wpaper:875
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    1. Timothy Besley & Anne Case, 1992. "Incumbent Behavior: Vote Seeking, Tax Setting and Yardstick Competition," NBER Working Papers 4041, National Bureau of Economic Research, Inc.
    2. Andreas Haufler & Ian Wooton, . "Country Size and Tax Competition for Foreign Direct Investment," Working Papers 9702, Business School - Economics, University of Glasgow.
    3. Alexander Klemm, 2009. "Causes, Benefits, and Risks of Business Tax Incentives," IMF Working Papers 09/21, International Monetary Fund.
    4. Devereux, Michael P & Lockwood, Ben & Redoano, Michela, 2002. "Do Countries Compete Over Corporate Tax Rates?," The Warwick Economics Research Paper Series (TWERPS) 642, University of Warwick, Department of Economics.
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    7. Mervyn A. King & Don Fullerton, 1984. "The Taxation of Income from Capital: A Comparative Study of the United States, the United Kingdom, Sweden, and Germany," NBER Books, National Bureau of Economic Research, Inc, number king84-1.
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    16. Mintz, Jack M, 1990. "Corporate Tax Holidays and Investment," World Bank Economic Review, World Bank Group, vol. 4(1), pages 81-102, January.
    17. Rosanne Altshuler & Timothy J. Goodspeed, 2015. "Follow the Leader? Evidence on European and US Tax Competition," Public Finance Review, , vol. 43(4), pages 485-504, July.
    18. Zodrow, George R. & Mieszkowski, Peter, 1986. "Pigou, Tiebout, property taxation, and the underprovision of local public goods," Journal of Urban Economics, Elsevier, vol. 19(3), pages 356-370, May.
    19. Gordon, Roger H, 1986. "Taxation of Investment and Savings in a World Economy," American Economic Review, American Economic Association, vol. 76(5), pages 1086-1102, December.
    20. Alexander Klemm & Dennis P. J. Botman & Reza Baqir, 2008. "Investment Incentives and Effective Tax Rates in the Philippines; A Comparison with Neighboring Countries," IMF Working Papers 08/207, International Monetary Fund.
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