Theoretical and Practical Aspects of Corporate Income Tax

Abstract

Corporate income tax burden comparisons in different countries are mostly performed by using the statutory corporate tax rates. A more objective level of the current corporate tax burden, however, is represented by effective corporate tax rates that include the influence of both factors, i.e. the statutory corporate tax rate and the tax base. The economic literature (see e.g. Nicodeme, G., European Commission 2001) offers a variety of approaches toward calculating effective corporate tax rates. The most commonly used ones can be divided into three groups: approaches based on using the macro backward-looking methods, micro backward-looking methods and micro forward-looking methods. The differences among macro and micro approaches depend on the data used. The macro approaches compute the effective tax rates based on aggregated macroeconomic data, contained in the national accounting of individual states. The micro approaches calculate these rates using elements of financial statements of individual companies that contain either empirical data or the data concerning theoretical perspectives. To estimate the company’s tax burden the backward-looking approaches use the ex-post reallife data of the companies concerned. The forward-looking approaches use the data concerning particular future entrepreneurial investment decisions of companies. Approaches based on the macro backward-looking methods are able to detect the total taxation differences at the national level. Approaches based on the micro backward-looking methods are mainly based on the nationality of particular companies, regardless of the nationality of tax systems that currently affect their taxable operations. Approaches based on the micro forward-looking methods are based on methodologies developed by King, M.A. and Fullerton, D. (National Bureau of Economic Research Working Paper No.1058, 1983), and also by Devereux and Griffi (Institute for Fiscal Studies Working Paper Series No.W98/16, 1999), and do not Int Adv Econ Res (2015) 21:247–248 DOI 10.1007/s11294-014-9505-9