Transcript Worldwide Corporate Income Taxes

K. Markle and D. Shackelford
Comments by
Julian Alworth
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Descriptive study: Provide a worldwide comparison of
Effective Tax Rates measured from company financial
statements
Despite very significant changes in company tax rates over
three decades country rankings have not changed
significantly
Differences in ETRs between purely domestic companies
(operating in only one jurisdiction) and multinationals are
generally much smaller than expected
Other controlling factors (industry, size, assets etc.) do not
affect the value of ETRs. Interpretation: cross-sectional
(country) effects are the only factors of significance
Companies with subsidiaries in tax haven countries have
lower ETRs but the coefficient is modest
Authors are cautious in drawing conclusions
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Sometimes difficulty following the language

Multinational data: longer time series/ domestic data poor
especially for European countries
◦ Presumably always speaking of overall consolidated tax expense
of companies but sometimes authors refer to parent taxation
◦ Domestic companies: small samples relative to MNS in some
instances very few observations (France no data –Germany two
years)
– Weakness of data should be stressed more in paper (appendix?)
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What are the authors expecting? Are the results
“reasonable” or do they comply with their expectations?
What is the benchmark?
Useful to have a comparison with statutory rates and other
measures of effective rates (Devereux et al. EMTR)
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
Ranking of statutory / ETR similar
◦ Is this expected?
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ETR significantly lower than statutory rates
◦ Is this expected?
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Statutory Rate
Effective rate
Japan
40
1
42
1
United States
39
2
28
2
Germany
39
3
26
3
Canada
36
4
22
8
India
35
5
24
6
France
34
6
25
5
China
33
7
21
9
Australia
30
8
24
6
United Kingdom
30
8
26
3
5
40%
35%
30%
25%
20%
15%
10%
5%
0%
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Statutory
Devereux-EATR
K-S ETR
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70%
60%
50%
40%
30%
20%
10%
0%
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Statutory
Devereux-EATR
K-S ETR
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MEASURED ETR vs STATUTORY TAX RATE
45
JAPAN
40
35
y = 0.8831x - 4.5859
ACTUAL ETR
30
R² = 0.2776
US
UK
25
GERMANY
20
15
10
5
0
0
5
10
15
20
25
30
35
40
45
STATUTORY RATE
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There are divergences between accounting
and taxable income.
What are the source of these divergences?
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Measurement problem
Temporary vs. permanent differences
Shelters?
Transfer pricing: surprising that data do not show
significantly lower ETRS for MNCs
Testing equation for further work: dependent
variable ETR- Statutory Rate
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Germany: Multinational companies appear to
have higher ETR than purely domestic
companies
◦ This contrasts with other studies which have
examined financial statement data
◦ Weichenrieder on Germany (1996); Weichenireder
and Mintz (2009) show income shifting out of
exemption country
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