Determinants of corporate tax

mickyboy

Hi folks,

For my thesis I am looking at the determinants of corporate tax across the OECD. For my dependent variable I'm using corporate tax revenues/GDP. My independent variables are statutory corporate tax rates, (statutory corporate tax rates)², corruption, foreign direct investment, log(GDP/capita) and unemployment.

I'm happy enough with my regressions so far, but I was wondering if anyone has any ideas about more factors.

Any ideas would be appreciated.

Thanks

nesf

Be careful to remember that the headline corporation tax rate and the actual corporation tax rate for a particular company can be very different due to a bewildering network of allowances and rebates available in some countries, specifically France is very bad for doing this, most companies there pay nothing close to the headline rate at the end of the year from what I've read.

Victor

Ask yourself "what is a corporate tax?"

Different countries have different taxes. In Ireland, businesses pay rates, employers PRSI, VAT (not all can claim it back), duties, stamp duty and corporation tax. Some countries have turnover taxes and dividend taxes.

However, which can be considered corporate taxes and which are consumption taxes? Is employers PRSI really a tax on employers or on employees?

You might try to find out what the average corporate taxes are for a country - how much profit did all companies make and how much tax did they pay?

mickyboy

Thanks for the replies.

I spent quite a bit of time looking at effective average tax rates (EATR) and effective marginal tax rates (EMTR) in similar papers. Most papers follow a methodology set out in Devereux & Griffith (1998) http://eprints.ucl.ac.uk/14909/1/14909.pdf. I believe this methodology maybe too complex for my thesis and my deadline could be an issue

So I was thinking about using a more basic, parsimonious method. One idea I was thinking of is corporate income tax revenue/((net operating surplus of financial+non fininancial corporations) + dividends (received+paid)+interest (received+paid)).

Does this idea look anyway conceptually correct/incorrect?

noodler

mickyboy wrote: »

Thanks for the replies.

I spent quite a bit of time looking at effective average tax rates (EATR) and effective marginal tax rates (EMTR) in similar papers. Most papers follow a methodology set out in Devereux & Griffith (1998) http://eprints.ucl.ac.uk/14909/1/14909.pdf. I believe this methodology maybe too complex for my thesis and my deadline could be an issue

So I was thinking about using a more basic, parsimonious method. One idea I was thinking of is corporate income tax revenue/((net operating surplus of financial+non fininancial corporations) + dividends (received+paid)+interest (received+paid)).

Does this idea look anyway conceptually correct/incorrect?

http://oireachtasdebates.oireachtas.ie/debates%20authoring/debateswebpack.nsf/takes/dail2013011600074?opendocument

Go down to Question 178 (Tax Yield)

The effective corporation tax rates are taken from the PWC/World Bank annual report on Taxes. According to Noonan, there is no 'one' way to calculate an effective rate.

I'd have thought your best best was to stick with the the method used in the report. Although, I have heard the French complain that in the report's example - a certain type of company has to be presumed (size, industry etc) which could inclfuence things.