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Worldwide Corporate Income Taxes

Worldwide Corporate Income Taxes. K. Markle and D. Shackelford Comments by Julian Alworth . Summary. Descriptive study: Provide a worldwide comparison of Effective Tax Rates measured from company financial statements

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Worldwide Corporate Income Taxes

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  1. Worldwide Corporate Income Taxes K. Markle and D. Shackelford Comments by Julian Alworth

  2. Summary • Descriptive study: Provide a worldwide comparison of Effective Tax Rates measured from company financial statements • Despite very significant changes in company tax rates over three decades country rankings have not changed significantly • Differences in ETRs between purely domestic companies (operating in only one jurisdiction) and multinationals are generally much smaller than expected • Other controlling factors (industry, size, assets etc.) do not affect the value of ETRs. Interpretation: cross-sectional (country) effects are the only factors of significance • Companies with subsidiaries in tax haven countries have lower ETRs but the coefficient is modest • Authors are cautious in drawing conclusions

  3. Comments • Sometimes difficulty following the language • Presumably always speaking of overall consolidated tax expense of companies but sometimes authors refer to parent taxation • Multinational data: longer time series/ domestic data poor especially for European countries • Domestic companies: small samples relative to MNS in some instances very few observations (France no data –Germany two years) • Weakness of data should be stressed more in paper (appendix?) • What are the authors expecting? Are the results “reasonable” or do they comply with their expectations? What is the benchmark? • Useful to have a comparison with statutory rates and other measures of effective rates (Devereux et al. EMTR)

  4. Comments • Ranking of statutory / ETR similar • Is this expected? • ETR significantly lower than statutory rates • Is this expected?

  5. Ranking of statutory and ETR

  6. Effective Tax Rate Comparisons: UK

  7. Effective Tax Rate Comparisons: Germany

  8. Assessment of this finding • There are divergences between accounting and taxable income. • What are the source of these divergences? • Measurement problem • Temporary vs. permanent differences • Shelters? • Transfer pricing: surprising that data do not show significantly lower ETRS for MNCs • Testing equation for further work: dependent variable ETR- Statutory Rate

  9. Startling Results • Germany: Multinational companies appear to have higher ETR than purely domestic companies • This contrasts with other studies which have examined financial statement data • Weichenrieder on Germany (1996); Weichenireder and Mintz (2009) show income shifting out of exemption country

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