Effective Tax Rates Research Articles

Data Breach Notification Laws and Corporate Tax Planning

ABSTRACTThis study explores the impact of data breaches on corporate tax planning in the United States. The results reveal that when a firm's headquarter is located in a state that has adopted a data breach notification (DBN) law, there is a significant 3.8% decrease in the long‐term effective tax rate. This reduction translates to annual tax savings of approximately $8.13 million. Furthermore, tax sheltering is found to decrease by 19.17% compared to the sample average. These effects are particularly pronounced in financially constrained firms and those operating in high‐tech industries. The findings suggest that after the introduction of mandatory data breach disclosure requirements, firms are less inclined to engage in aggressive tax avoidance practices, which could otherwise lead to increased litigation costs. Instead, they prioritize efficient tax planning strategies to improve after‐tax cash flows.

Effect of Selected Board Attributes on Tax Aggressiveness of Quoted Insurance Companies in Nigeria

The main objective of this study is to examine the effect of selected board attributes on tax aggressiveness of quoted insurance companies in Nigeria. Specifically, the study examines the combined effect of female directors and board financial expertise on tax aggressiveness of quoted insurance companies in Nigeria. Tax aggressiveness was measured using effective tax rate while female directors and financial expertise were measured using proportion of female directors on the board to the total number of independent directors and proportion of financial experts on the board to the total number of independent directors respectively. This study uses the longitudinal research design. The population of the study is the entire twenty-three listed companies in the Nigerian insurance sector. The sample size of twenty-two was selected after eliminating one without complete data. Data were sourced from the annual financial statements of the listed insurance companies for the period 2011-2022. To be able to examine the effect of female directors and financial expertise on tax aggressiveness, the study used panel multiple regression model for the analysis. The result of the study shows that female directors have negative and insignificant effect on tax aggressiveness. However, the study finds statistical evidence which suggests that boards financial expertise has significant effect on tax aggressiveness in the insurance sector. From the findings, it was concluded that board attributes have strong explanatory power on tax aggressiveness. The study recommends that since management could aspire to avoid more taxes, because they estimate the tax benefits too high, more external board members with accounting and corporate reporting knowledge should be admitted on the boards to curtail managerial aggressive tax planning.

Do stock prices affect corporate tax behavior?

Purpose This study aims to examine how firm-specific information in stock prices influences corporate tax behavior. Design/methodology/approach This study uses ordinary least squares (OLS) regressions to examine the association between stock price informativeness and effective tax rate (ETR) volatility. Findings Stock price informativeness is positively associated with short-term tax avoidance as measured by ETR volatility. Originality/value While prior research examines the association between market activity and the level of ETRs, this study examines other various aspects of tax behavior.

PENGARUH UKURAN PERUSAHAAN, PROFITABILITAS, DAN LEVERAGE TERHADAP TARIF PAJAK EFEKTIF (Studi Kasus pada Sektor Energi yang Terdaftar di Bursa Efek Indonesia Periode 2019-2022)

Taxes are one of the biggest contributions for the country. Therefore, the government tries to maximize tax revenue to finance the country's development needs. However, this is contrary to the company's objectives, which want the company's effective tax rate to decrease further away from the statutory tax rate. This research aims to know the effect of firm size, profitability, and leverage on effective tax rate. The sample selection used a purposive sampling technique and obtained 52 samples. Data analysis using multiple linear regression analysis with the IBM SPSS version 26 program. The research results show that firm size has a positive effect on the effective tax rate, profitability and leverage have a negative effect on the effective tax rate. Simultaneously company size, profitability and leverage influence the effective tax rate.

An input-output approach to study the impact of carbon taxes in (almost) every country

Some forty carbon tax initiatives have been adopted, and more countries are evaluating the possibility of implementing this instrument every year. However, there is significant heterogeneity in tax rates, type of covered emissions, and regulated sectors, which is explained by the different levels of environmental concern and cost that each country is willing to assume. In this context, the present study simulates various scenarios of carbon taxes in (almost) every country in the world to contribute to the global design of climate change policies. Specifically, input-output tables and sectoral CO2 emissions of each country are used to calibrate the environmental extension of the Leontief price model, obtaining the impacts on prices, production, and emissions at the sectoral, national, or global level. The results show that the same effective tax rate can have very different effects in each country, mainly explained by the composition of the energy matrix. In addition, global CO2 emissions would be reduced by 0.10% ∼ 0.23% for each dollar of CO2 tax applied to all sectors and countries. Finally, a more outstanding commitment from rich countries and larger developing countries is required to contribute more decisively to combating climate change in the short term.

The impact of asset specificity on corporate tax avoidance: Do financial constraints and product market power matter?

Our findings reveal that asset specificity significantly enhances corporate tax avoidance, with firms exhibiting lower cash effective tax rates. Firms with higher asset specificity also engage in more aggressive tax avoidance strategies, including tax dodging and long-term tax planning. Additionally, our analysis indicates that the positive impact of asset specificity on tax avoidance is less pronounced in firms with lower ESG performance but is more pronounced in those facing negative demand shocks or operating during periods of economic policy uncertainty. We also find that financial constraints and product market power mediate the relationship between asset specificity and tax avoidance, with financial constraints serving as the dominant economic channel. These findings offer new insights into the factors driving corporate tax avoidance and highlight the complex interplay between asset specificity, financial constraints, product market power, and tax planning strategies.

Analysis of the Influence of Capital Intensity, Inventory Turnover (ITO) and Return on Assets (RoA) on the Effective Tax Rate (Etr) with Institutional Ownership as a Moderating Variable

The aim of this research is to determine the effect of capital intensity, inventory turnover (ITO), and return on assets (ROA) on the effective tax rate (ETR) with institutional ownership as a moderating variable. This research uses secondary data in the form of financial reports that have been audited by auditors, where the data was obtained from the official website of the Indonesia Stock Exchange (IDX) at idx.co.id. The sampling technique used in this research is the purposive sampling method. The population in this research is property and real estate companies listed on the Indonesia Stock Exchange (IDX) in 2019-2021, totaling 9 companies. The sample used in this research was 41 companies with 123 observation data, taken based on certain criteria. This research is quantitative research with secondary data sources including the company's annual financial reports obtained through the website www.idx.co.id and the official website of each company. The method used to analyze the influence of independent variables on the dependent variable in this research is multiple linear regression analysis using SPSS 26. The results of the research show that Return on Assets and Inventory Turnover (ITO) have a positive and significant effect on the Effective Tax Rate, while Capital Intensity has a negative effect. but it is not significant to the Effective Tax Rate for property and real estate sector companies listed on the Indonesia Stock Exchange (IDX) in 2019-2023. Institutional ownership can moderate the influence of Capital Intensity, Return on Assets, and Inventory Turnover (ITO) on the Effective Tax Rate in property and real estate sector companies listed on the Indonesia Stock Exchange (IDX).

Final tax regression

The urgency of this research lies in the pressing need to address regressiveness in Indonesia's taxation system, particularly concerning the Final Income Tax. As such, this study aims to examine the implications of Final Income Tax on taxpayers, especially high-income individuals, and propose potential reforms to ensure fairness and progressivity in the tax regime. To achieve this objective, the research employs a combination of quantitative analysis and theoretical frameworks. Income data from High-Wealth Individuals (HWIs) is analyzed to assess the regressiveness of the Effective Tax Rate (ETR), with a specific focus on income components subject to Final Income Tax. Additionally, the study reviews existing literature on tax reform and draws insights from international best practices to formulate recommendations for policy improvements. By combining empirical analysis with theoretical insights, this research contributes to a deeper understanding of the challenges within Indonesia's taxation system and offers actionable recommendations for policymakers and Directorate General of Taxes as Indonesian tax authorities.

Determinant Factors of Profitability in Fintech Lending Companies in Indonesia from 2019 to 2022 Using Principal Component Analysis (PCA)

This reserach examines factors influencing the profitability of Fintech lending companies in Indonesia. A purposive sampling method was employed to select 45 companies annually. The data for this research are cross-sectional, comprising the years 2019, 2020, 2021, and 2022. The methods in this research are Principal Component Analysis (PCA) and multiple linear regression. Findings reveal that current ratio, cash ratio, working capital turnover, debt to assets ratio, short-term debt ratio, equity multiplier, total assets turnover, fixed assets turnover, tangible assets ratio, and effective tax rate significant determinants of profitability for Fintech lending companies in Indonesia. This reserach can help Fintech lending companies improve their profitability.

The Effect of Effective Tax Rate and Tunneling Incentive on Transfer Pricing Decisions in Mining Companies Listed on the Indonesia Stock Exchange for the 2019-2021 Period

Companies in the mining industry make decisions to determine transfer pricing, the purpose of this study is to examine the role of effective tax rate (ETR) and tunneling incentives in transfer pricing. All companies listed on the IDX for the mining sector from 2019 to 2021 make up the population of this study. This study uses a quantitative method, which relies on numerical data. A total of 12 companies were sampled for this study, over 4 years. The analysis in this study found that neither the effective tax rate nor the tunnelling incentive had any influence on the decisions made regarding the determination of transfer pricing.

The Impact of Cryptocurrency Exposure on Corporate Tax Avoidance Among US Listed Companies

This study examined the association between corporate cryptocurrency activities and tax avoidance outcomes, utilizing data from US public firms covering the period from 2015 to 2023. Financial data were sourced from Compustat, while details regarding cryptocurrency activities were manually extracted from 10-K and 10-Q filings. Our analysis employed a fixed-effects regression model to examine the impact of these activities on cash effective tax rates (ETR). The findings indicate that firms engaged in cryptocurrency activities tend to have a lower ETR compared with those without such involvement. Notably, this effect was predominantly observed in companies directly engaged in cryptocurrency activities, such as accepting cryptocurrency as a payment method or actively trading cryptocurrency on an exchange platform. In contrast, firms involved in crypto mining or initial coin offerings did not exhibit a similar association. Our findings offer significant regulatory insights for governance bodies concerned with the implications of corporate cryptocurrency activities on tax strategies.

An in-depth analysis of financial metrics and their interrelations in shaping the performance of commercial banks in Cambodia

This study aims to systematically identify and analyze key financial metrics that influence the performance of commercial banks in Cambodia. Utilizing 2023 data from the National Bank of Cambodia across 59 banks, the research adopts an explanatory framework based on cross- sectional data analysis. The findings reveal that Loan Growth (LG) exhibits no statistical significance in relation to Return on Equity (ROE), suggesting that increases in lending do not necessarily enhance bank profitability in the Cambodian context. Conversely, Non-Performing Loans (NPL) demonstrate a marginally significant positive relationship with ROE, indicating that effective management of these loans can still yield profitability. Additionally, the Loan to Deposit Ratio (LDR) shows a significant negative impact on ROE, suggesting that higher liquidity risks associated with elevated LDR levels may hinder profitability. The study further confirms that Market Share (MS), Loan Loss Provision (LLP), Cost to Income Ratio (CIR), Effective Tax Rate (ETR), and Net Interest Margin (NIM) significantly influence ROE. These results underscore the importance of effective risk management, operational efficiency, and strategic financial planning in enhancing bank profitability. Recommendations for Cambodian commercial banks include improving risk management practices, focusing on loan portfolio quality, optimizing LDR, implementing cost efficiency measures, and enhancing tax management strategies.

Reputational Costs as a Tax Avoidance Deterrent in Small to Medium Enterprises

Reputational concerns are considered a disincentive to tax avoidance. Prior literature examining tax avoidance in the context of large and listed firms attributes this relationship to the scrutiny to which large firms are subject. This begs the question if reputational concerns are a relevant tax avoidance deterrent in the setting of small to medium sized enterprises (SMEs) because SMEs have fewer stakeholders, lower disclosure requirements, and are subject to less media attention. Using survey data from Belgian SMEs, we find that SMEs with reputational concerns report an effective tax rate that is 8.57 percentage points higher than that of SMEs with low reputational concerns. We further examine which firm characteristics moderate the deterrent effect of reputational concerns on tax avoidance. We find that potential reputation damage is more important to the tax avoidance decision of firms with less financial freedom and firms with a higher need to maintain creditor relations. Finally, we document that reputational concerns act as a corporate tax avoidance deterrent against aggressive positions.

An integrated analysis of key financial metrics driving commercial bank performance in Cambodia

This study aims to systematically identify and analyze key financial metrics that influence the performance of commercial banks in Cambodia. Utilizing 2023 data from the National Bank of Cambodia across 59 banks, the research adopts an explanatory framework based on cross-sectional data analysis. Findings reveal a statistically significant positive correlation between Non-Performing Loans (NPLs) and Return on Assets (ROA), suggesting effective NPL risk management by Cambodian banks, contrary to traditional financial theory. Loan Growth (LG) does not significantly impact ROA, indicating that external factors like market conditions and loan quality are more critical. Furthermore, Market Share (MS) has no significant impact on ROA, suggesting that market share may not be a critical determinant of bank performance in Cambodia. A significant negative relationship is observed between the Loan to Deposit Ratio (LDR) and ROA, suggesting that higher LDRs expose banks to liquidity risks and reduced profitability. Both Loan Loss Provision (LLP) and Cost to Income Ratio (CIR) negatively affect ROA, while the Effective Tax Rate (ETR) shows a marginally positive relationship. The Net Interest Margin (NIM) significantly impacts ROA, underscoring the importance of managing interest-earning assets and liabilities. Recommendations include investing in advanced risk management frameworks, enhancing loan quality, maintaining a balanced LDR, utilizing technology for cost efficiency, focusing on effective tax planning, and optimizing NIM through competitive pricing. Future research should explore additional contextual factors that affect profitability dynamics in the Cambodian banking sector.. Keywords: Commercial Banks, Financial Metrics, Return on Assets (ROA), Non-Performing Loans (NPLs), Loan to Deposit Ratio (LDR), Cost to Income Ratio (CIR), Effective Tax Rate (ETR), Net Interest Margin (NIM), Loan Growth (LG), Market Share (MS).

Local Income Inequality and the Value of Corporate Tax Responsibility

ABSTRACT Corporate tax responsibility, or the obligation of companies to pay their “fair share” of taxes, is increasingly perceived as a component of firms’ social responsibility. Considering tax payments through the redistributive function, we examine how the association between corporate tax responsibility and firm value varies based on the presence of a salient social issue—local income inequality. Firms headquartered in areas of average income inequality have a negative relation between effective tax rate (ETR) and firm value, consistent with traditional economic theory and prior research. However, as local income inequality rises above average, the relation between ETR and firm value becomes more favorable (i.e., less negative). We interpret these findings as evidence that the relation depends on the salience of tax payments as a social issue. Further, the results are substantiated by firms whose socially responsible tax payments are consistent with their reputation as good corporate citizens. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: D22; H23; H25; H32.

THE INFLUENCE OF CORPORATE SUSTAINABILITY ON TAX DISTRIBUTION AND DIVIDEND DISTRIBUTION

This study investigates the impact of corporate sustainability on effective tax rates and dividend payout ratios among companies listed in the LQ45 index over the period from 2018 to 2022. Corporate sustainability is increasingly recognized as a crucial aspect of business strategy, influencing financial structures and shareholder value distribution. Utilizing a panel data analysis taken from Bloomberg, we explore how sustainability growth rate affect their tax strategies and dividend policies. Our findings reveal a nuanced interaction between corporate sustainability and fiscal obligations. Specifically, the study indicates that higher levels of corporate sustainability correlate with a lower effective tax rate; however, this relationship is statistically insignificant. This suggests that while sustainable practices may influence tax-related decisions, other factors such as changes in tax legislation, profitability, and tax planning strategies might play more pivotal roles in determining the effective tax rate. Conversely, the impact of corporate sustainability on dividend payout ratios is both negative and statistically significant. Companies with robust sustainability practices tend to reinvest a greater portion of their earnings back into the business to support sustainable growth and long-term value creation, leading to lower dividend distributions. This finding highlights the prioritization of capital retention over immediate shareholder returns among sustainably focused firms in the LQ45 index. This research contributes to the understanding of how sustainability initiatives intersect with financial policies within Indonesian listed companies. The insights provided could help investors and policymakers better understand the financial implications of sustainability growth rate, particularly in emerging markets where such practices are gaining momentum. The results also suggest areas for further research, particularly in exploring the indirect pathways through which sustainability might influence corporate financial policies.

CSR's Role In Tax Avoidance: Impact Of Financial Performance And Green Accounting

This research examines how financial performance, green accounting, and corporate social responsibility (CSR) affect tax avoidance in IDX-listed mining companies between 2019 and 2022. This quantitative research employed multivariate correlational methods to analyse financial information from 23 coal mining companies. The variables are measured using the Effective Tax Rate (ETR) for tax avoidance, the GRI version 4 index for CSR, the Return on Assets (ROA) for financial performance, and the dummy technique for green accounting. Smart PLS uses Partial Least Square (PLS) for data analysis, including validity, reliability, and structural model assessments. The research found that financial success increases tax avoidance more than green accounting. CSR, which affects corporate tax avoidance, is also improved by green accounting. Corporate social responsibility mediates the relationship between green accounting and tax avoidance, not financial success and tax avoidance. This research shows that corporate social responsibility (CSR) mediates green accounting and tax avoidance.

Do political connections pay? Evidence of corporate payroll tax planning in Chinese firms

ABSTRACT Drawing on a dataset of listed Chinese firms, our study reveals a notable reduction in effective payroll tax rates for politically connected firms. Using China’s anti-corruption campaign as an exogenous shock, our difference-in-differences (DID) analysis indicates a significant increase in the effective payroll tax rates of politically connected firms after the campaign. Well-developed legal institutions, social security fund holdings, and high-quality external audits mitigate the effect of political connections on a firm’s effective payroll tax rates. These results are instrumental in regulating firms’ payroll tax payments from an informal institutional perspective.

Further Thoughts on the Capital Gains Tax

The paper illustrates why Canada’s Budget 2024 tax rules do not treat the earners of capital gains uniformly or fairly, because of inflation. The effective tax rates on real capital gains vary substantially among taxpayers depending upon the holding period and the rate of return. Furthermore, capital gain taxes may even create real losses. Uniform inclusion rates applied to nominal capital gains poorly measure real capital gains and typically result in considerable underassessment or overassessment of actual capital gains income (i.e., improvement in purchasing power). An appropriate measure of capital gains should use a cost base adjusted for inflation.

Determinants of German firm’s adjusted effective tax rate

ABSTRACT This analysis examines firm-specific determinants of the effective tax rate of German limited liability companies. The effective tax rate is calculated by considering the local trade tax, corporate profit tax, and solidarity tax for 9,318 firms from 2020 based on the Orbis data base. Our findings demonstrate a inverse u-shape relationship between the effective tax rate and firm size. Furthermore, companies with major shareholders tend to have lower tax rates, while those with a supervisory board tend to pay higher tax rates on average. These findings are consistent with the theoretical considerations on tax aggressiveness.