Taxes and Firm Size: Political Cost or Political Power? A Meta-Regression Analysis

Belz, Thomas; Hagen, Dominik von; Steffens, Christian

doi:10.2139/ssrn.2697468

Cited by 18 publications

(14 citation statements)

References 99 publications

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“…Empirical studies nd evidence for both a positive and a negative relation between rm size and e ective tax rates (Belz et al , 2018). Note that our framework is exible enough to integrate both views.…”

Section: Tax Payments Of Heterogeneous Rmsmentioning

confidence: 83%

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Effective tax rates, endogenous mark-ups and heterogeneous firms

Irlacher

Unger

2018

Economics Letters

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We provide a new explanation why e ective tax rates are smaller for larger rms even in the absence of common channels like pro t shifting and lobbying. This result emerges in a heterogeneous rms model with endogenous markups. Our framework features imperfect tax pass-through into prices and partial deductibility of production costs. Corporate taxes reduce markups and hence pre-tax pro ts, especially for high cost rms. As production costs are only partially deductible, high cost producers are a ected most by taxes. We further show that shocks which a ect markups through competition, like globalization, reinforce the heterogeneity in e ective tax rates across rms.

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Section: Tax Payments Of Heterogeneous Rmsmentioning

confidence: 83%

“…Our paper is also related to empirical studies on the relation between the e ective tax rate and rm size. In a recent survey, Belz et al (2018) document con icting results on this relationship. Following the accounting literature, there are two competing theories that explain this ambiguity.…”

Section: Introductionmentioning

confidence: 99%

Effective tax rates, endogenous mark-ups and heterogeneous firms

Irlacher

Unger

2018

Economics Letters

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“…According to existent literature, ETR variation may be partially explained and connected to several characteristics of companies such as the shareholder framework (Badertscher et al 2016;Chen et al 2010), the managers' incentives (Rego and Wilson 2012;Armstrong et al, 2011), corporate and government structure (Desai et al, 2007), the characteristics of business (Higgins et al, 2015), the companies' size (Katsikas and Lewis, 2016;Belz et al, 2015;Richardson and Lanis, 2007) and managers' characteristics (Chyz et al, 2013). Nevertheless, few studies have been conducted towards analysing the behaviour of effective tax analysis (Guenther, 2014) and its dependence on nominal rate, which makes the effective tax rate expected to be as high as the nominal tax rate.…”

Section: Objectives Hypothesis and Methodologymentioning

confidence: 99%

“…Several studies also investigated the relationship between the ETR and the size of the company, obtaining conflicted results depending on the way we calculate the ETR, the focussed period of time and the model used (Phillips et al 2004;Shackelford and Shevlin 2001). Katsikas and Lewis (2016) have proven that, in the companies analysed, the size of the company affects the values of the effective tax rates, whereas Belz et al (2015) demonstrated that larger companies have a superior ETR over smaller companies. Earlier Gupta and Newberry (1997) stated that the size of the company is not directly associated with the effective tax rate, and found evidence that a lower ETR is associated with a lower profitability, a larger leverage and a stronger capital intensity.…”

Section: Effective Tax Ratementioning

confidence: 99%

The relationship between the effective tax rate and the nominal rate

Dias

Reis²

2018

CyA

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<p class="Pa7">The main goal of this investigation is to understand the relationship between the nominal rate and the effective tax rate and to evaluate if the differences between them depend on the value of the nominal rate. Based on a sample of 1,530 companies from 5 countries members of the European Union (Denmark, Slovenia, Finland, Luxembourg and the United Kingdom) there’s evidence that the effective tax rate is positively related to the nominal rate. The effective tax rate was calculated through the ratio between the value of the tax paid over the result before tax. When the nominal tax rate increases, the effective rate increases equally but with a slower growth. This relationship is softened if we take into account the value of the nominal tax rate, which shows that companies have the ability to manage the results in order to increase savings in tax.</p>

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“…See the meta‐regression analysis of Belz et al . () for an investigation of the relationship between firm size and ETR in light of two competing accounting theories, the political cost theory and the political power theory.…”

Section: Methodsmentioning

confidence: 99%

R&D INTENSITY AND THE EFFECTIVE TAX RATE: A META‐REGRESSION ANALYSIS

Belz

Hagen

Steffens

2016

Journal of Economic Surveys

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We apply meta-regression techniques to provide a quantitative review of the empirical literature on how research and development (R&D) expenses affect the effective tax rate (ETR). R&D expenses relate to a well-accepted profit shifting channel, strategic placement of intellectual property within a multinational entity. Using a unique hand-collected data set, we add a new perspective to the current base erosion and profit shifting (BEPS) state of research and debate, in three ways: First, observing that primary studies report mixed evidence on how R&D expenses affect ETR, we provide a consensus estimate for this effect. Second, we consider this effect in more detail by separating a tax accounting effect and a profit shifting effect, which to our knowledge has not yet been investigated. We detect that one-third of the R&D effect on the ETR is due to the tax accounting effect and could be mitigated via book-tax conformity. We further find that 10% of the profit shifting effect can be traced back to R&D tax credits. Third, our meta-regression reveals factors that are possible sources of variation and bias in previous empirical studies.

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Taxes and Firm Size: Political Cost or Political Power? A Meta-Regression Analysis

Cited by 18 publications

References 99 publications

Effective tax rates, endogenous mark-ups and heterogeneous firms

Effective tax rates, endogenous mark-ups and heterogeneous firms

The relationship between the effective tax rate and the nominal rate

R&D INTENSITY AND THE EFFECTIVE TAX RATE: A META‐REGRESSION ANALYSIS

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