Do brazilian publicly traded companies that pay less tax create more jobs?

Abstract

There is a widespread assumption that lower corporate taxation will lead to higher rates of job creation, but this belief may be false, as challenged by Anderson and Pizzigati (2017). This article studies the relationship between job creation and 3 tax aggressiveness proxies in Brazilian non-financial firms listed in B3 in the period between 2011 and 2016. The estimates were created using the methods of ordinary least squares (OLS) and quantile regression. The results obtained from the estimates using OLS did not present significant evidence of an association between the rate of job creation and effective tax rates. In the quantile regressions, it was possible to find a significant and positive relationship between job creation and effective tax rates, exclusively in quantile 25 of the effective tax rate on value added. Quantiles 50 and 75 presented negative relationships between job creation and effective tax rates in different tax aggressiveness metrics. The results suggest that the firm’s tax aggressiveness profile influences the relationship. While in the less tax-aggressive companies a reduction of the tax burden would potentially stimulate job creation, in those companies that are more tax-aggressive, the tax break may lead to the undesirable effect of a fall in job creation.