Effective Tax Rates in Corporate Taxation: a Quantile Regression for the EU

Abstract

In this work we study the determinants of the effective tax rates for corporate taxation in countries of the European Union. First, we carry out an exhaustive review of the empirical literature where no consensus is reached about the signs of the determinants and we can observe that in the case of the European countries this topic has scarcely received attention, contrary to the US case. Then from the Compustat database and for the period 1992-2009, we estimate quantile regressions that allow possible nonlinear relationships to be detected. The estimations reveal different effects of factors such as size, debt, asset composition and profitability on the effective corporate tax rate depending on the decile. In short, for companies with lower ETRs, the most influential variables are the size, the intensity of inventories and the profitability, whereas for the companies that suffer the highest fiscal pressure it is debt that turns out to be the strongest determinant. These results justify the employment of quantile regression instead of the traditional linear approximations.

The Factor of Tax Avoidance

“…Based on the research results Richardson et al (2016), Kraft (2014), and Delgado et al (2014) shows that there is a significant correlation between the profitability of the company with tax evasion. Different with Zarai research (2013) indicates that the higher profitability of the company will be the higher effective tax rate, which means that the lower the tax evasion by the company while the research results Prakosa (2014) found that the return on assets negatively affects tax evasion.…”

What Is Relationship between Profits and Dividends in Agricultural Legal Entities?

“…Income is computed as taxable revenues reduced by eligible costs incurred to generate, assure or maintain taxable income, subject to additional tax adjustments. From the international perspective, corporate income tax has been characterized in recent years by a gradual decrease of the nominal tax rate and the countries of the EU are no exception (Delgado et al, 2014). The corporate income tax has developed also in the Slovak Republic.…”

The Influence of Leverage, Density of Fixed Assets and Independent Commissioners on Effective Companies Tax Rate in Indonesia

“…Those explanations are in line with the prior research that found a negative association between leverage and ETR (Di and Hua, 2013;Lazar, 2014;Kraft, 2014;Stamatopoulus, 2016). However, Wang et al (2014), and Delgado et al, (2014) discovered that the more corporates rely on debt, the higher their ETR. On the other hand, the study conducted by Ardyansah and Zulaikha (2014) found that leverage does not influence ETR.…”

“…Therefore, the greater the proportion of fixed assets in total assets, the lower the ETR (Lazar, 2014;Stamatopaolus, 2016). Conversely, Darmadi and Zulaikha (2013), Ardyansah and Zulaikha (2014), and Delgado et al (2014) discovered that the higher the amount of fixed assets, the higher the ETR. Study by Liu and Cao (2007) and Di and Hua (2013) found that density of fixed assets does not influence ETR.…”