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Determinants of Corporate Effective Tax Rates: Evidence from Listed Companies in China

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  • Xing Liu
  • Shujun Cao

Abstract

The authors examine what determines corporate effective tax rates (ETR) at the firm level, using the panel data on 425 listed companies in China's stock market over the seven-year period 1998-2004. First they identify some possible determinants of ETR based on theories and firm characteristics in China, including firm size, leverage, asset mix, profitability, ownership structure, and overemployment. Then they conduct quantitative analyses and panel estimations with the randomeffect model. The findings from the empirical results are as follows. The firm size and capital intensity of the listed companies seem to have no significant effects on ETR. The impact of leverage on ETR is negative and significant. ETR tends to be smaller for firms with overemployment of labor, which may be related to incentive policies provided by government to promote employment. Effects of profitability and ownership structure on ETR vary with external tax environments, and they turn out to be positive as all firms enjoy tax incentives.

Suggested Citation

  • Xing Liu & Shujun Cao, 2007. "Determinants of Corporate Effective Tax Rates: Evidence from Listed Companies in China," Chinese Economy, Taylor & Francis Journals, vol. 40(6), pages 49-67, November.
    • Handle: RePEc:mes:chinec:v:40:y:2007:i:6:p:49-67
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    Cited by:

    1. Marco Carreras & Chandu Dachapalli & Giulia Mascagni, 2017. "Effective corporate tax burden and firm size in South Africa: A firm-level analysis," WIDER Working Paper Series wp-2017-162, World Institute for Development Economic Research (UNU-WIDER).
    2. Anastasia Kraft, 2014. "What Really Affects German Firms' Effective Tax Rate?," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 5(3), pages 1-19, July.
    3. Ayşe İmrohoroğlu & Kai Zhao, 2020. "Household Saving, Financial Constraints, And The Current Account In China," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(1), pages 71-103, February.
    4. Lazar Sebastian, 2015. "Tax Payments Determinants In Romania," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 749-756, July.
    5. Der-Fen Huang & Ni-Yun Chen & Ko-Wei Gao, 2013. "The tax burden of listed companies in China," Applied Financial Economics, Taylor & Francis Journals, vol. 23(14), pages 1169-1183, July.
    6. Liansheng Wu & Yaping Wang & Wei Luo & Paul Gillis, 2012. "State ownership, tax status and size effect of effective tax rate in China," Accounting and Business Research, Taylor & Francis Journals, vol. 42(2), pages 97-114, June.
    7. Nguyen Huu Cung & Than Thanh Son, 2020. "Determinants of Corporate Income Tax Revenue in Vietnam," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 10(1), pages 1-7.
    8. Cláudia Braz & Maria Manuel Campos & Sónia Cabral, 2022. "A micro-level analysis of corporate income taxation in Portugal," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    9. Uhde, André, 2021. "Tax avoidance through securitization," The Quarterly Review of Economics and Finance, Elsevier, vol. 79(C), pages 411-421.
    10. Tao, Peng & Gong, Feng & Zhu, Kaiyue, 2023. "Tax competition among local governments: Evidence from the spillovers of location-based tax incentives in China," China Economic Review, Elsevier, vol. 82(C).
    11. İmrohoroğlu, Ayşe & Zhao, Kai, 2018. "The chinese saving rate: Long-term care risks, family insurance, and demographics," Journal of Monetary Economics, Elsevier, vol. 96(C), pages 33-52.
    12. Simeon Oeta & Richard Kiai & Joseph Muchiri, 2019. "Influence of tax planning on financial performance of manufacturing companies listed at Nairobi Securities Exchange," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 8(6), pages 262-270, October.
    13. Belz, Thomas & von Hagen, Dominik & Steffens, Christian, 2019. "Taxes and firm size: Political cost or political power?," Journal of Accounting Literature, Elsevier, vol. 42(C), pages 1-28.
    14. Alena Andrejovska & Jozef Glova & Martina Regaskova & Natalia Slyvkanyc, 2024. "The impact of the effective tax rate change on financial assets of commercial banks: The case of Visegrad group countries," E&M Economics and Management, Technical University of Liberec, Faculty of Economics, vol. 27(1), pages 175-191, March.
    15. Bubanić Marijana & Šimović Hrvoje, 2021. "Determinants of the effective tax burden of companies in the Telecommunications activities in the Republic of Croatia," Zagreb International Review of Economics and Business, Sciendo, vol. 24(2), pages 59-76.
    16. Yinka Mashood Salaudeen* & Rafiu Olayinka Akano, 2018. "Non-Linearity in Determinants of Corporate Effective Tax Rate: Further Evidence from Nigeria," International Journal of Economics and Financial Research, Academic Research Publishing Group, vol. 4(3), pages 56-63, 03-2018.
    17. Marco Carreras & Purnachandar Dachapalli & Giulia Mascagni, 2017. "Effective corporate tax burden and firm size in South Africa: A firm-level analysis," WIDER Working Paper Series 162, World Institute for Development Economic Research (UNU-WIDER).
    18. Luisito Bertinelli & Arnaud Bourgain & Abdoul Karim Diamoutene, 2017. "Corporate Effective Tax Rate in Sub-Saharan Africa: Evidence from Formal Companies of Mali," DEM Discussion Paper Series 17-18, Department of Economics at the University of Luxembourg.
    19. Qiwen Dai & Huihua Huang & Xiaoqi Zhang & Yumin Su & Cheyuan Liu & Qiangyi Li, 2022. "Mediation Effect of Corporate Tax Burden and the Relationship between Environmental Regulation and Firm Performance," IJERPH, MDPI, vol. 19(22), pages 1-23, November.

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