Effective Corporate Income Tax Rates: Southern and Northern Economies of the European Union

Abstract

In the present study, we attempt to investigate the determinants of the effective corporate tax rate of companies of the European Union (EU) discriminating between northern and southern economies. We adopt in our analysis the period after the outbreak of the crisis in the Eurozone up today including some years before 2009 in the assessed period. Our empirical investigation is based on three alternative approaches to effective income tax rate based on accounting information. We investigate the determinants of ECITR assessing two sub-samples of firms from all the aforementioned industrial sectors for 16 member countries of Europe. The first sub-sample consists of firms from 12 member countries of "North" European Union and the second sub-sample consists of firms from 4 member countries of "South" European Union. The analysis covers the period 2004-2016. Estimation results point out that the effective corporate income tax rate is variously affected by firm-specific determining factors for both northern and southern economies. The relation between ECITR and determining factors is ascertained to be less significant (sensitive) during the pre-crisis period in comparison with the respective empirical findings after the outburst of the economic crisis in the European Union. Empirical findings indicate that effective corporate income tax rate is more vulnerable to financial leverage for southern economies in comparison to the northern economies signaling financing structure differences between the two EU-country groups. Finally, there is evidence that there is an indisputable and positive coexistence between business profitability and tax burden.

The Conjuction of Tax Auditing Mechanism with Behavioral and Institutional Parameters of Tax Evasion: The Role of Accounting Rules and Forensic Accounting

“…They point out that that the relation between effective corporate income tax rate and determining factors is less significant (sensitive) during the precrisis period in comparison with the respective empirical findings after the outburst of the economic crisis in European Union. Balios et al (2020b) investigate the determinants of the effective corporate tax rate of companies of the European Union (EU) discriminating between northern and southern economies taking into consideration prior research that has indicated that there is a wide gap between northern and southern EU economies as it concerns in some cases both fiscal as well as structural divergences. They also assert that that the effective corporate income tax rate is variously affected by firm-specific determining factors for both northern and southern economies.…”