Decrease In Tax Rate Research Articles

Can changes in corporate income tax rate affect corporate innovation?

The relationship between corporate income tax rates and innovation is a critical international issue. Existing studies often overlook the potential mechanisms of market competition and productivity heterogeneity. This paper addresses these gaps by integrating these elements into a unified mathematical analysis framework. Using China's corporate income tax reform as a quasi-natural experiment, this study empirically tests the model. The findings reveal that decreases in tax rates significantly foster innovation, while increases have the opposite effect. The underlying mechanism involves market competition, with the impact of tax changes being more pronounced in firms with higher productivity. This study deepens the understanding of the nexus between corporate income tax and innovation, providing new insights to refine tax policies that promote innovative economic development globally.

Save It for a Rainy Day: Evidence from State Corporate Income Tax Rate Changes

ABSTRACT We examine the effect of state corporate income tax rate changes on firms’ liquidity management. Using a difference-in-differences design, we find that firms hold more cash when they are experiencing an increase in state corporate income tax rate. More specifically, on average, a 1 percent increase in state corporate income tax rate leads to a 2.51 percent increase in firms’ average cash holdings. We also find that the effect is stronger in firms with low and risky cash flows, more growth opportunities, and more financial constraints. We find no evidence of this relationship when the state corporate income tax rate decreases. Overall, these findings suggest that firms conserve more cash to mitigate tax-induced frictions, which is consistent with the precautionary motive of cash holdings. Our paper speaks to policymakers that the increase of state income tax rate has real effects on firms’ cash holdings. Data Availability: All data used in this study are from publicly available sources. JEL Classifications: H25; H710; M41; G33.

Politics and income taxes: Progress and progressivity

AbstractThis paper begins with a survey of the literature on the political economy approaches to labor income taxation. We focus on recent progress made by examining in detail the specific properties of nonlinear taxes derived in the context of voting. Next, we present new results on the existence of a majority voting equilibrium that unifies work in the standard framework. Finally, we discuss how recent theoretical results help us uncover empirical patterns from the last 50 years in the US tax system, namely, a sharp decrease in top marginal tax rates, the rise of the Earned Income Tax Credit, and increased progressivity in the middle of the income distribution.

Do signatory auditors with tax expertise facilitate or curb tax aggressiveness?

Prior research concludes that tax-expert auditors facilitate tax aggressiveness. However, these studies examine auditors who also provide non-audit tax services to their clients, creating conflicting incentives. We predict that tax-expert auditors, who do not provide non-audit tax services, reduce tax aggressiveness, because tax aggressiveness imposes costs on them. We test our prediction using Chinese data, allowing us to identify Certified Tax Agents as tax-expert auditors. We find that companies are less tax aggressive when their signatory auditor is a tax-expert who does not provide non-audit tax services. Consistent with a causal relation, a decrease in tax rates, which reduces clients’ incentives to be tax aggressive, weakens the effect of tax-expertise on tax aggressiveness. Moreover, tax-expert auditors attenuate the type of tax aggressiveness that results in tax-related misstatements. Overall, by examining auditors who do not provide non-audit tax services, we find that tax-expert auditors curb tax aggressiveness, contrary to prior research.

법인세 인하가 기업 투자를 촉진하는가: 조세조정 토빈q 모형을 사용한 실증분석

This paper is to investigate the effect of corporate income tax on business investment by using panel data of Korean companies between 1983 and 2022. This paper estimates tax term in the tax-adjusted q model before and after economic crisis.
 The tax term estimation between 1983 and 1997 shows that the effect of corporate income tax rate on investment was strong before Korean financial crisis. Corporate income tax cut promoted significantly business investment. The estimation between 1998 and 2010 after Korean financial crisis shows that corporate income tax cut promoted moderately business investment. But the estimation between 2011 and 2022 shows that the effect of corporate income tax rate on investment is insignificantly small. Corporate income tax cut promote barely business investment after global financial crisis in 2008.
 Empirical results in this paper provide the new perspective on the corporate income tax policy. The Effect of the corporate income tax cut policy on business investment decreases rapidly as tax rate decreases and tax rate cut reduces the effect of tax incentive policy, such as investment tax credit and depreciation savings on investment.

Supply-side economics with AS-AD in Ramsey dynamic general equilibrium

The Ramsey dynamic general equilibrium (RDGE) model has been applied broadly within mainstream macroeconomic analysis. While the labor market of the RDGE model has long been developed, any consensus on the goods market has remained elusive. This has made supply-side policy analysis within it difficult since it is founded upon the premise of aggregate supply (AS) featuring more prominently than aggregate demand (AD). Specifying a relative price of output that makes the goods market consistent with the recursive structure of the RDGE paradigm, the paper then applies AS-AD quantitatively to study productivity increases and income tax rate decreases that have been a centerpiece in supply-side economics. The paper contributes how both a productivity increase and a capital income tax rate decrease cause a net shift out of AS relative to AD that lowers the relative price of output. It shows how productivity increases and tax rate reductions quantitatively increase macroeconomic variables. The increase in economic activity remains proportional to the percentage increase in productivity, giving rise to our introduction of the concept of a productivity multiplier. Tax rate reductions cause increased economic activity at a decreasing rate as the level of the tax rate decreases. The paper shows the sense in which capital income tax rate reductions quantitatively have larger magnitude effects on output, consumption, investment, and capital wealth, while labor income tax rate reductions have larger magnitude effects on employment. Tax revenue implications are also presented with the first Laffer curves linked to the RDGE AS-AD analysis. Limitations, extensions and policy applications are suggested.

Tax Competition and Employment

ABSTRACT We examine how exposure to international tax competition affects domestic firms’ employment. Consistent with prior work, we find evidence that reductions in foreign tax rates affect the domestic competitive environment via increases in import competition and investment in foreign-owned subsidiaries. We posit that these changes in the domestic competitive environment can cause managers to reduce their firms’ employment levels. Consistent with our expectation, we find that relative decreases in foreign tax rates negatively affect total labor compensation at domestic firms ex ante exposed to import competition and competition from foreign-owned peers. The effect of exposure to tax competition is greater for firms more exposed to product-market competition and those that are less able to expand investment without also increasing employment levels. Taken together, our results suggest that foreign tax rate changes can affect managers’ domestic employment decisions by changing the domestic competitive environment. JEL Classifications: E24; F14; F16; H23; H35.

The Moderation Role of Tax Rate Reduction and Firm Size on the Effects of Tax Aggressiveness on Company Value

This study aims to examine the impacts of reducing tax rates and firm size on tax aggressiveness in regards to the company value in Indonesia. This study used 302 samples of companies with 1,118 observation points within the period of 2017 - 2021. The proxy measurement of tax aggressiveness is with Effective Tax Rate and the company value using Tobins'Q. The research analysis was carried out using multiple regression models of panel data employing fixed effects as the best research model. The results showed that there was no significant effect of aggressive tax on firm value. This study also found that a decrease in tax rates did not affect the relationship between tax aggressiveness and firm value, but firm size did impact on both tax aggressiveness and firm value.

Analisis Kewajiban Perpajakan PPh 21, PPh 23 dan PPh Final Pada PT Taiba Consulting Indonesia

Various policies related to Pandemi Covid 19 have an impact on the decline in the realization of the 2021 State Expenditure Budget as evidenced in the 2020 APBN Realization Data experienced a decrease in the delivery of realization by 19.6%, annual tax notification for Income Tax in 2021, in particular taxpayers experienced Pandemi Covid uncertainty 19, Shortfall factors have a stake in swelling of the realization of budget financing by 6.1% in economic recovery so that it has an impact on slowing the profitability of business entities caused by the policy of increasing installment discounts to 50% and a decrease in corporate income tax rates by 11%. This study was conducted with the aim of finding out the implementation, payment, deduction and reporting of PPh 21 tax obligations, PPh 23, Final Construction Services PPh. The method used in this study uses qualitative, primary and secondary data sources through documentation, observation and interviews. Data analysis uses data reduction, while it is to validate data using the triangulation technique of source, time and technique. The results of the study concluded: (1) Payment, Cutting, and Reporting of PPh 21 in accordance with Law Number 36 Year 2008 concerning Taxation (2) Payment, Cutting, Reporting PPH 23 Not in accordance with Law Number 36 Year 2008, because of the postponement of vendors in PPh 13 payment (3) Payment, Cutting, and Final Income Tax Reporting in accordance with Tax Law Number 36 of 2008.

The Effect of the Effective Corporate Tax Rate Toward Investment Decision in Indonesian Public Company

Purpose This research aimed to determine the effect of the effective tax rate in public company investment in Indonesia. Design/methodology/approach The research was conducted using firm data during 2008-2020 and considered the long-term investment concept. Meanwhile, the cross-section of 672 companies and the ordinary least square technique were used to get the estimation. Findings The estimation result showed that the effective tax rate has significant negative effect on fixed asset investment. If effective tax rate decrease, it can be because the company gets tax rate reduction incentives, conduct accelerated depreciation, fiscal reconciliation on the financial statement which can increase fixed asset investments. Moreover, the estimation also showed that the age of the company is able to strengthen the relationship between effective tax rate and company investment. The difference in domestic and foreign companies does not affect the elasticity ETR toward investment. Research limitations/implications Based on the estimation result mentioned, it is expected to provide guidance in implementing incentive tax, which can encourage public company investment. Originality/value There are many studies on the effect of income tax rates, but the results cannot be used specifically in Indonesia since the tax sensitivity may be different based on the development level of the country and the characteristics of the company.

Analisis Pengaruh Kebijakan Keuangan Terhadap Profitabilitas dengan Kebijakan Penurunan Tarif PPh Badan Sebagai Variabel Moderasi

This study aims to examine the effect of financial management policies on profitability. Apart from that, the effect of each independent variable on the dependent was tested with a decrease in corporate income tax rates as a moderating variable. The population in this study are manufacturing companies listed on the Indonesia Stock Exchange (IDX) in 2020. There are 96 samples that meet the following criteria; manufacturing companies whose 2019 and 2020 financial statements are available on the IDX, manufacturing companies that do not suffer losses and manufacturing companies that do not have interest write-off income on debt restructuring. This research was analyzed using Multiple Regression Analysis. The results of this study state that the dividend distribution policy has a positive effect on profitability, an increase in debt has a negative effect on profitability, an increase in investment has a positive effect on profitability, a decrease in corporate income tax rates is not able to moderate the effect of dividend distribution policies on profitability, a decrease in corporate income tax rates can strengthen the effect of funding policy on profitability, lower corporate income tax rates weakened the effect of funding policy on profitability.

Efekti poreza na dohodak na stopu nezaposlenosti u Sjedinjenim Američkim Državama

This study investigates the correlation between state income tax and unemployment rates across the United States. Using panel data in 50 states pertaining to the period from 2006 to 2022 with different regression models, the results suggest that the state corporate and personal income tax rates are positively correlated with the state unemployment rate. Specifically, a 1% decrease in the personal income tax rate may lead to a 0.712% decrease in the state unemployment rate, and a 1% decrease in the corporate income tax rate may cause a drop of 0.328% in the state unemployment rate. In addition, the results show that a personal income tax hike is associated with an increase of 1.532% in the state unemployment rate, and a corporate income tax hike may increase the state unemployment rate by 0.78%. The results of this study are relevant in the context of increasing government spending in the US and the world. Policymakers and government officials may not want to abuse the tax policy to fund the budget deficits.

Temperature and corporate tax avoidance: Evidence from Chinese manufacturing firms

This study estimates the effects of temperature on corporate tax avoidance in the context of climate change, using data from Chinese manufacturing firms. The firms exhibit increases in tax avoidance activities in response to high temperatures. We find that an additional day with temperature above 90 °F results in a 0.097 percentage-points decrease in effective tax rate (ETR), or 0.67% evaluated at the mean level, with effects concentrated on labor-intensive firms. We also find evidence that higher tax compliance can be a cover for tax avoidance activities in the previous year. This provides a possible way for tax authorities to detect tax noncompliance. In addition, we offer a comparatively new perspective to understand the undesirable impacts of climate change, that is, high temperatures can lead to opportunistic behaviors of firms. Using temperature, which is exogenous to the firms' policies, we also draw a more reliable causal inference regarding the effect of negative shocks on corporate tax avoidance.

Average marginal tax rates in the U.S., 1913–2019

Measuring marginal tax rates at the economy-wide level, while useful for empirical work in economics and beyond, is a non-trivial exercise. This paper revises and updates through 2019 the average marginal income and Social Security tax rates originally conceived by Barro and Sahasakul (1983, 1986) and Seater (1982, 1985) and subsequently updated by Stephenson (1998). The update extends previous estimates of the marginal tax rate series over two decades—thus providing more than a century of data going back to 1913. This update also revises the estimates reported in previous studies to provide historically consistent series following more recent comprehensive revisions of the National Income and Product Accounts. The newly updated series reflect tax legislation over the last two decades. Generally, tax cuts in the early 2000s along with the Great Recession led to a decrease in overall average marginal tax rates from levels achieved in the late 1990s. The Trump tax overhaul in 2017 lowered average marginal tax rates by about one percentage point. • Data on average marginal tax rates for the U.S. individual income tax, 1913–2019. • Data on average marginal tax rates for the Social Security tax, 1937–2019. • Average marginal comprehensive (income plus Social Security) tax rates.

Corporate Income Tax Changes in the Context of Earnings Management: a Review of the Literature

The purpose of the article/hypothesis: This paper aims to provide a comprehensive review of the theoretical and empirical literature regarding tax-induced earnings management. In particular, the association between anticipated tax changes and earnings management is of interest to the authors.
 Methodology: This paper uses a systematic literature review to achieve its research objectives.
 Results of the research: The presented research is mostly devoted to tax rate decreases and focuses on accrual-based earnings management methods. In anticipation of a tax rate change, companies shift their income from a high to a low tax rate period. Moreover, the probability of tax-induced earnings management is higher in case of extreme changes in the tax rate, larger prospects for tax savings as well as in case of private firms. This paper identifies several inconsistencies and gaps in the current literature, emphasizing that the connection between firms’ characteristics, the level of book-tax conformity and the practice of earnings management remains unclear.

Reducing MSME Tax Rates and Socialization Against Taxpayer Compliance

The purpose of this study was to examine and analyze the effect of reducing MSME tax rates on taxpayer compliance and to examine and analyze the effect of socialization on taxpayer compliance. This type of data uses primary data sourced from a questionnaire sample of 100 taxpayers from a population of 19,877. Data analysis used descriptive analysis and multiple linear regression. The results of the analysis show that the decrease in MSME tax rates has a positive and insignificant effect on taxpayer compliance and tax socialization has a positive and significant effect on taxpayer compliance

The effect of employee satisfaction on effective corporate tax planning: Evidence from Glassdoor

Human capital plays a substantial role in the corporate tax planning process, and thus a firm's ability to attract, retain and motivate talented employees is a potential determinant of tax planning outcomes. Motivated by the premise that employee satisfaction is a key driver of productivity, I investigate the relationship between employee satisfaction ratings, collected from the website Glassdoor, and corporate tax planning outcomes. I find that firms with higher employee satisfaction ratings exhibit significantly greater tax avoidance as well as lower tax risk. A one-point increase in overall employee satisfaction ratings, on a five-point scale, is associated with a 2.6 percentage point decrease in cash effective tax rates (Cash ETRs) and a 0.20 standard deviation decrease in Cash ETR volatility. These results are stronger for firms with larger corporate tax departments, which rely more on employees to manage the tax planning process. I also find that employee satisfaction is negatively associated with UTB reserves, indicating that the increased tax avoidance is unlikely to arise from aggressive tax positions. Finally, through path analyses, I find that employee satisfaction can influence a firm's tax outcomes by reducing tax department turnover and improving the firm's internal information environment. Overall, my findings are consistent with the premise that employees play a substantial role in implementing tax avoidance strategies and mitigating tax risk, thus managers who adopt a strong work culture and employee-friendly policies can attain beneficial tax outcomes.

MENGUAK EFEK PENURUNAN TARIF PAJAK PENGHASILAN DI MASA PANDEMI COVID-19

This article explains the effect of lowering income tax rates during the COVID-19 pandemic. The government's role in maintaining economic stability is carried out by issuing fiscal policies, in terms of taxation, namely by reducing the Corporate Income Tax rate. This research intends to find out the results of a decrease in corporate income tax rates affecting a decrease in current taxes deposited into the state treasury, a decrease in the total income tax burden, and recording in the income statement financial statements. The informants of this research are members of the Tax Rules Update Forum. This type of qualitative research uses a netnography approach. The reduction in current taxes deposited into the state treasury benefits the company by minimizing the costs incurred for the obligation to deposit state taxes. Companies that have deferred tax liabilities receive deferred tax benefits recorded in the balance sheet account, so the total income tax expense has decreased. In recording the income statement, the company has deferred tax assets adding to the deferred tax expense. Deferred tax expense in profit or loss account.

Racial change and income tax policy in the US states

AbstractThis article examines the social correlates of US state income tax policy-making between 1980 and 2008. We focus on the three factors the existing research suggests that are relevant to redistributive policy-making: income structure, left power resources and racial composition. We employ a holistic measure of state income taxation—the dollar-weighted average marginal tax rate—that captures both the overall level of taxation as well as the distribution of tax incidence, key determinants of the redistributive effect of income tax policy. Our analyses examine within-state changes over time as estimated using both actual and fixed income distributions, which enables us to isolate real changes in tax policy from shifts in the income distribution. We find evidence that increases in the percentages of Black and Hispanic residents are associated with a decrease in average marginal tax rate on wage income. We situate these findings within the broader literature on the social determinants of redistributive policy-making.

Do corporate income tax cuts decrease labor share? Regression discontinuity evidence from China

Recent years have seen a sustained decline in the labor share around the world. This paper studies this trend by focusing on the effect of corporate income taxes on firm-level labor shares. From 2010 to 2013, the Chinese central government cut the corporate income tax rate in 21 cities for service firms whose revenue from outsourcing services offshore surpassed half of their total revenue. Leveraging a regression discontinuity design with proprietary administrative data, we find that a one percentage point decrease in the statutory corporate income tax rate induces a one percentage point decrease in the firm-level labor share. Firms respond to the tax cut by increasing their physical capital and bank borrowing while keeping their employment unchanged, consistent with a capital deepening process documented in recent theoretical models. Our results suggest that falling corporate income taxes could have contributed to the global decline in the labor share.