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Habit persistence in effective tax rates

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  • Mark Harris
  • Simon Feeny

Abstract

This paper uses administrative data from the Australian Tax Office (ATO) to model the effective tax rates (ETRs) of large Australian corporates. The extent to which there is any habit persistence in ETRs is also examined. The results suggest that unobserved entity heterogeneity is important in explaining ETRs. In terms of observed heterogeneity, entity size, level of leverage, capital intensity, foreign income and R&D, are important explanators of ETRs. There is also evidence of a significant amount of habit persistence, implying that ETRs converge monotonically towards the statutory rate of corporation tax.

Suggested Citation

  • Mark Harris & Simon Feeny, 2003. "Habit persistence in effective tax rates," Applied Economics, Taylor & Francis Journals, vol. 35(8), pages 951-958.
    • Handle: RePEc:taf:applec:v:35:y:2003:i:8:p:951-958
    DOI: 10.1080/0003 684032000050577
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    References listed on IDEAS

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    Cited by:

    1. M. Shanmugam, 2020. "Research and Development Intensity and Effective Tax Rate: Empirical Evidence from India," Emerging Economy Studies, International Management Institute, vol. 6(2), pages 223-234, November.
    2. Ostad, Parastoo & Mella, Javier, 2023. "The value relevance of corporate tax expenses in the presence of partisanship: International evidence," Global Finance Journal, Elsevier, vol. 57(C).
    3. Gemmell, Norman & Hasseldine, John, 2012. "The Tax Gap: A Methodological Review," Working Paper Series 2435, Victoria University of Wellington, Chair in Public Finance.
    4. 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.
    5. 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.
    6. Stamatopoulos, Ioannis & Hadjidema, Stamatina & Eleftheriou, Konstantinos, 2019. "Explaining corporate effective tax rates: Evidence from Greece," Economic Analysis and Policy, Elsevier, vol. 62(C), pages 236-254.
    7. Feeny, Simon & Gillman, Max & Harris, Mark N., 2005. "Econometric Accounting of the Australian Corporate Tax Rates: a Firm Panel Example," Cardiff Economics Working Papers E2005/16, Cardiff University, Cardiff Business School, Economics Section.
    8. Stamatopoulos, Ioannis & Hadjidema, Stamatina & Eleftheriou, Konstantinos, 2016. "Explaining Corporate Effective Tax Rates Before and During the Financial Crisis: Evidence from Greece," MPRA Paper 73787, University Library of Munich, Germany.
    9. Gemmell, Norman & Hasseldine, John, 2012. "The Tax Gap: A Methodological Review," Working Paper Series 18717, Victoria University of Wellington, Chair in Public Finance.

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