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Do Multinationals or Domestic Firms Face Higher Effective Tax Rates?

  • Kevin S. Markle
  • Douglas Shackelford

To our knowledge, this paper provides the most comprehensive analysis of firm-level corporate income tax expenses to date. We use publicly available financial statement information to estimate firm-level effective tax rates (ETRs) for 10,642 corporations from 85 countries from 1988 to 2007. We find that multinationals and domestic-only companies face similar ETRs. We also find that, on average, ETRs declined by seven percentage points or 20% over the period. German, Japanese, Australian and Canadian decreases were large. American, British, and French declines were more modest. Nonetheless, because ETRs were falling worldwide, the ordinal rank from high-tax countries to low-tax countries changed little. Japanese firms always faced the highest ETRs. ETRs for tax havens and countries from the Middle East and Asia (ignoring Japan) were always lower than those for the U.S. and European countries. These findings should provide some empirical underpinning for ongoing policy debates about the taxation of multinational profits.

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File URL: http://www.nber.org/papers/w15091.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15091.

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Date of creation: Jun 2009
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Publication status: published as Markle, Kevin S. and Douglas A. Shackelford, 2012. Cross-country Comparisons of Corporate Income Taxes. NBER Working Paper 15091. National Tax Journal 65, 493-528.
Handle: RePEc:nbr:nberwo:15091
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  1. 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.
  2. 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.
  3. 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.
  4. Shackelford, Douglas A. & Shevlin, Terry, 2001. "Empirical tax research in accounting," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 321-387, September.
  5. 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.
  6. Desai, Mihir A. & Hines, James R. Jr., 2002. "Expectations and Expatriations: Tracing the Causes and Consequences of Corporate Inversions," National Tax Journal, National Tax Association, vol. 55(3), pages 409-40, September.
  7. Atwood, T.J. & Drake, Michael S. & Myers, Linda A., 2010. "Book-tax conformity, earnings persistence and the association between earnings and future cash flows," Journal of Accounting and Economics, Elsevier, vol. 50(1), pages 111-125, May.
  8. Julie Collins & Douglas Shackelford, 1995. "Corporate domicile and average effective tax rates: The cases of Canada, Japan, the United Kingdom, and the United States," International Tax and Public Finance, Springer, vol. 2(1), pages 55-83, February.
  9. Julie H. Collins & Douglas A. Shackelford, 2003. "Do U.S. Multinationals Face Different Tax Burdens than Other Companies?," NBER Chapters, in: Tax Policy and the Economy, Volume 17, pages 141-168 National Bureau of Economic Research, Inc.
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