Sector and size effects on effective corporate taxation

Nicodeme, Gaetan (2002): Sector and size effects on effective corporate taxation. Published in: Economic Papers , Vol. 175, (August 2002)

Abstract

The current debate in corporate taxation is focussing on leveling the tax playing field within the European Union in order to allow companies incorporated in different countries to face the same competitive conditions. However, various elements of corporate tax rules may discriminate against companies registered in the same country but having different sizes or operating in different sectors. Using the micro backward-looking approach to compute effective tax rates for eleven European countries, the US, and Japan, this paper shows that there could be some concerns regarding domestic tax discrimination since some sectors and sizes enjoy significantly more favorable tax burdens.

• Item Type: MPRA Paper
• Language: English
• Keywords: Taxation; corporate taxation; effective taxation
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H22 - Incidence; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency ; Optimal Taxation; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H25 - Business Taxes and Subsidies; H - Public Economics > H6 - National Budget, Deficit, and Debt > H61 - Budget ; Budget Systems

References

Altshuler, Rosanne and Harry Grubert (2001), "Repatriation taxes, repatriation strategies and multinational financial policy", NBER Working paper, No. 8144, March.

Andreoni, James; Erard, Brian, and Jonathan Feinstein (1998), "Tax Compliance", Journal of Economic Literature, Vol. XXXVI, June, pp. 818-860.

Bartelsman, Eric J. and Roel Beetsma (2002), "Why pay more? Corporate tax avoidance through transfer pricing in OECD countries", Journal of Public Economics, forthcoming.

Bronchi, Chiara (2001), "Options for reforming the tax system in Greece", OECD Working Paper, No. 291, April 2001.

Bronchi, Chiara and José C. Gomes-Santos (2001), "Reforming the tax system in Portugal", OECD Working Paper, No. 302, July 2001.

Buijink, Willem; Janssen, Boudewijn & Schols, Yvonne (1999), Corporate Effective Tax Rates in the European Union, Report commissioned by the Ministry of Finance in the Netherlands, Maastricht Accounting and Auditing Research and Education Center, April 1999.

Bureau du Plan (2000), “Charges administratives en Belgique”, Planning Paper, No. 92, http://www.plan.be/fr/pub/pp/detail_pp.stm?pub=PP092

Cnossen, Sijbren (2001), “Tax policy in the European Union: a review of issues and options”, Studies in Economic Policy, No.5, Erasmus University Rotterdam, October 2001.

Collins, Julie H. and Douglas A. Shackelford (1996), “Corporate Domicile and Average Effective Tax Rates: The Cases of Canada, Japan, the United Kingdom, and the United States”, in The Taxation of Multinational Corporations, Joel Slemrod editor, Kluwer Academic Publishers.

Conseil Supérieur des Finances (2001), La Réforme de L'impôt des Sociétés: le Cadre, les Enjeux et les Scénarios Possibles, Belgium, April 2001.

Council of the European Communities (1990a), "Council Directive 90/434/EEC of 23 July 1990 on the common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States", O.J.E.C., L225, 20th August 1990, pp. 1-5.

Council of the European Communities (1990b), "Council Directive 90/435/EEC of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States", O.J.E.C., L225, 20th August 1990, pp. 6-9.

Desai, Mihir A., Foley, Fritz C. and James Hines Jr. (2001), "Repatriation taxes and dividend distortions", NBER Working Paper, No. 8507.

Devereux, Michael & Griffith, Rachel (1998), “The Taxation of Discrete Investment Choices”, Institute For Fiscal Studies Working Paper, http://www.ifs.org.uk/workingpapers

Ernst and Young, Worldwide Corporate Tax Guide.

European Commission (1998a), "Proposal for a Council directive on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States", COM(1998)67 final, O.J.E.C., C123/9.

European Commission (1998b), "Commission notice on the application of the State aid rules to measures relating to direct business taxation", O.J.E.C., C384/3, 10th December 1998.

European Commission (2000a), Banque de Comptes Harmonisés, mimeo.

European Commission (2000b), Structures of the Taxation Systems in the European Union, 1970-1997, Edition 2000, Luxembourg, OOPEC.

European Commission (2000c), Inventaire des Impôts perçus dans les Etats Membres de l’Union Européenne, 17th edition.

European Commission (2001a), Company Taxation in the Internal Market, Brussels, also "Towards an Internal Market without tax obstacles: a strategy for providing companies with a consolidated corporate tax base for their EU-wide activities", COM(2001)582. European Commission (2001b), "State Aid Scoreboard: second edition", COM(2001)782 final, Brussels, 20th December 2001, http://europa.eu.int/eur-lex/en/com/rpt/2001/com2001_0782en01.pdf

European Commission (2001c), "Ninth survey on State Aid in the European Union", COM(2001)403 final, Brussels, 18th July 2001, http://europa.eu.int/eurlex/en/com/cnc/2001/com2001_0403en01.pdf

European Commission (2001d), "Market performance of network industries providing services of general interest: a first horizontal assessment", annex to the report on the functioning of product and capital markets, http://europa.eu.int/comm/internal_market/en/update/economicreform/cardiff02-01-1778.htm

European Commission (2001e), "Financial situation of European enterprises", Supplement A, European Economy, No. 8-9, August 2001, http://europa.eu.int/comm/economy_finance/publications/euroean_economy/2001/a2001_0809_en.pdf

European Commission (2002a), “Corporate tax and innovation”, Innovation papers, No. 19, Brussels. European Commission (2002b), SMEs in Europe, including a first glance at EU candidate countries, Observatory of European SMEs 2002, No. 2.

Georgakopoulos, T. (2001), "Tax Reform in Greece", paper presented at the conference "Corporate and capital income taxation in the European Union", Mons, December 2001.

Grubert, Harry and Joel Slemrod (1998), "The effect of taxes on investment and income shifting to Puerto Rico", The Review of Economics and Statistics, Vol. 80, No.3, pp. 365-373.

Hines, James R., Jr. (1996), "Tax policy and the activities of multinational corporations", NBER Working Paper, No.5589, May.

Joumard, Isabelle (2001), "Tax systems in European union Countries", OECD Working paper, No. 301, June 2001.

Kinney, Michael and Janice Lawrence (2000), "An analysis of relative US tax burden of US corporations having substantial foreign ownership", National Tax Journal, Vol. LIII, No. 1, March 2000.

King, Mervyn A. & Fullerton, Don (1984), The Taxation of Income from Capital, University of Chicago Press, Chicago, 1984.

Martinez-Mongay, Carlos (2000), “The ECFIN Effective Tax Rates. Properties and Comparisons with other tax indicators”, Economic Paper, European Commission, October 2000.

Mendoza, Enrique G.; Razin, Assaf & Tesar, Linda L. 1994), “Computing Effective Tax Rates on Factor Incomes and Consumption: An International Macroeconomic Perspective”, CEPR Discussion Paper, n°866, Centre for Economic Policy Research, London, 1994.

Mendoza, Enrique G.; Milesi-Ferretti, Gian Maria and Patrick Asea (1997), "On the ineffectiveness of tax policy in altering long-run growth: Harberger's superneutrality conjecture", Journal of Public Economics, No. 66, pp. 99-126.

Ministry of Finance in the Netherlands (1999), “Tax Competition in the European Union”, http://www.minfin.nl/uk/taxation/TaxCompetition/taxcomp.htm

Nicodème, Gaëtan (2001), "Computing effective corporate tax rates: comparison and results", Economic paper, European Commission, http://europa.eu.int/comm/economy_finance/publications/econ mic_papers/economicpapers153_en.htm

OCDE (1994), Taxation and small businesses, Paris.

OECD (2001), "Tax Ratios: a critical survey", Tax Policy Studies, No. 5.

PricewaterhouseCoopers (1999), Study of Potential of Effective Corporate Tax rates in Europe, Report Commissioned by the Ministry if Finance in the Netherlands, Amsterdam, January 1999.

Slemrod, Joel and Marsha Blumenthal (1993), "The Income Tax Compliance Cost of Business", OTPR Working Paper, No.93-11.

Slemrod, Joel (1996), The Taxation of Multinational Corporations, Kluwer Academic Publishers, 1996.

Valenduc, Christian (2001), "Effective or implicit tax rates?", paper presented at the conference "Corporate and capital income taxation in the European Union", Mons, December 2001.

Volkerink, Bjorn & de Haan, Jakob (1998), Tax Ratios: A Critical Survey, University of Groningen, October 1998.

Whalley, John (2001), "Puzzles over international taxation of cross border flows of capital income", NBER Working paper, No. 8662.

Yahoo! Business, Tax regulations in different countries, http://biz.yahoo.com