Munich Personal RePEc Archive

Comparison of the methodologies for assessing effective tax burden of corporate income used in European Union

Blechová, Beata and Barteczková, Ivana (2008): Comparison of the methodologies for assessing effective tax burden of corporate income used in European Union. Published in:

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Abstract

In relationship with the changes of tax regulations in surrounding countries and last but not least in connection with the reform of public finances again the question of the further development of the Czech tax system is getting forward. The primary reason for the existence of taxes is fiscal, i.e. to ensure sufficient sources of public budgets for financing public property, however the tax policy must be provided in parallel with measures on the expenditure side of public budgets, that means it is necessary to perceive the tax policy in the context of the whole financial and economic policy of the state. In the sphere of direct taxes the most important external factor is the tax competition between single countries and that is also in the frame of the expanded European Union. The comparison of the income tax of legal entities shows in the last three years unambiguously the decreasing tax burden of firms. However, beside that economic behaviour of companies in connection with positioning their capital abroad reacts on comparability of tax conditions in single countries. Statutory corporate income tax rates are not the right indicator for the comparison of the real economic tax burden of various companies both in the frame of the one state and between the states. That is why for these purposes are used so-called effective corporate income tax rates discussed in this paper, which describes three methodologies for assessing these rates used in the European Union. These methodologies are using either real data from accounting on the national macro level or on the individual company micro level concerning realized entrepreneurial intentions by now or the hypothetical data concerning investments of these companies planed in the future. In conclusion of this paper are presented main differences between these three approaches.

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