Comparative analysis of the effective income tax function: empirical evidence using LIS data

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe effective income tax function is useful and practical methodology to analyze the relationship between income and tax amounts. It includes the measures of tax progressivity, the maximum effective tax rate, and horizontal inequity. We statistically estimated the effective income tax function using the seven countries out of LIS datasets and Korean data. We also estimated the R-S index and the Kakwani index so as to test the consistency among these indexes.Our empirical results give us several implications. Four different indexes of tax progressivity reflect different aspects about the progressivity, implying that it requires policy planners to evaluate the income tax system with alternatives. The estimated maximum effective tax rate is usually less than or ve ry close to its maximum statutory marginal tax rate, except for Norway and Korea. It implies that the estimation of the effective tax function is of great use and significance to evaluate the charateristics of the income tax law. The mean squared error from the effective income tax function can be used to represent the degree of the horizontal inequity as a 'quick' measure.2

Earnings management around tax rate reduction: evidence from China's 2007 corporate tax reform

“…There is a large body of economics, finance, and accounting literature analysing firms' tax saving activities around changes to tax law (e.g. Feldstein and Summers, 1979;Fullerton, 1984Fullerton, , 1986Lammersen, 2002;Gordon et al, 2003;Lim and Hyun, 2006;Dyreng et al, 2008;among others). However, the existing literature on firms' tax saving behaviour around tax policy changes generally measures a firm's effective tax rate (ETR) and rarely examines earnings management activities around changes to tax law.…”

Income tax liability for large corporations in China: 1998‐2007

“…There is a large amount of economics, finance, and accounting literature which has analysed firms' actual/affective/marginal tax rates (Feldstein and Summers, 1979;Fullerton, 1984Fullerton, , 1986Stickney and McGee, 1982;Gupta and Newberry, 1997;Lammersen, 2002;Plesko, 2003;Gordon et al, 2002;Lim and Hyun, 2006;Dyreng et al, 2007;among others). However, the existing literature generally examines corporations in Organization for Economic Co-operation and Development countries and rarely examines those in developing countries such as China.…”