Factors Affecting Effective Corporate Income Tax Rate of the Czech and Russian "Blue Chips" in 2012 - 2015

Marina Purina

doi:10.18267/j.efaj.177

Abstract

Nowadays, influence of international business groups on the individual countries´ economic systems is still growing. Effective tax rate showing a real level of the tax burden is one of the most important parameters of each economy. This article analyses the factors affecting the effective corporate income tax rate of the blue chips in the Czech Republic and in the Russian Federation. The factors are divided into two groups: external and internal ones. The hypothesis states that the internal factors (assets, debt ratio and equity) are more correlated with the dependent variable than the external ones (Paying Taxes index and average oil price). The regression analysis, particularly, panel data model with fixed effects, was used to estimate influence of the independent variables on the effective tax rate separately in Russia and Czech Republic. The research demonstrated that the mentioned internal factors are more significant for the Russian companies that the external factors. In the case of the Czech Republic, the same result was obtained with lower confidence level.

Highlights

The effective tax rate, especially in the case of the corporate income tax, is an important and well-known economic indicator showing a real level of the tax burden that often differs from a statutory tax rate
The analysis demonstrated that the internal factors such as assets, equity and debt ratio are more correlated with the effective corporate income tax rate than the external factors, such as Paying Taxes index and average oil price
Better result was obtained in the case of the Russian companies that demonstrated high confidence level for all analysed internal factors and for Paying Taxes index

Summary

Introduction

The effective tax rate, especially in the case of the corporate income tax, is an important and well-known economic indicator showing a real level of the tax burden that often differs from a statutory tax rate. The effective tax rate is considered to be one of the major parameters especially for decisions on investments and is monitored by states and private companies. Relations, where is a high probability that the factors of the effective tax rate would be similar as well which means that the differences (except for those explained by a statutory tax rate) are of a great interest; countries with different economic situations where the result cannot be predicted but remains useful for the investors, businessmen and governments of the analysed states Valuable evidences can be obtained from comparison of: countries with similar economic situation, e.g. some developed EU countries with close economic, political, cultural, etc. relations, where is a high probability that the factors of the effective tax rate would be similar as well which means that the differences (except for those explained by a statutory tax rate) are of a great interest; countries with different economic situations where the result cannot be predicted but remains useful for the investors, businessmen and governments of the analysed states

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Conclusion