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Do Business Characteristics Determine an Effective Tax Rate?

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  • Elena Fernández-Rodríguez
  • Antonio Martínez-Arias

Abstract

This article conducts a comparative analysis of the tax burden for listed companies in China and the United States and studies the factors that determine the effective tax rate (ETR). Information from the financial statements of sample companies in the Datastream/Worldscope database is used to calculate the corporate tax burden in these two geographical areas. The application of panel data estimation procedures finds (1) that U.S. companies have significantly higher ETRs than Chinese companies, and (2) that the tax burden is determined by the characteristics of each company (size, capital structure, asset mix, profitability) and the tax policy of the government. The main contribution of this article is its finding of a nonlinear relationship between ETR and size, leverage, and capital intensity. The simultaneous consideration of two geographical areas is also a new approach.

Suggested Citation

  • Elena Fernández-Rodríguez & Antonio Martínez-Arias, 2012. "Do Business Characteristics Determine an Effective Tax Rate?," Chinese Economy, Taylor & Francis Journals, vol. 45(6), pages 60-83, November.
    • Handle: RePEc:mes:chinec:v:45:y:2012:i:6:p:60-83
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    Cited by:

    1. Yu.E. Labunets & I.A. Mayburov, 2020. "Relationship of Tax Burden and Firm Size in the Timber Industry in Russia," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 19(4), pages 458-487.

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