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Do Multinationals or Domestic Firms Face Higher Effective Tax Rates?

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  • Kevin S. Markle
  • Douglas Shackelford

Abstract

To our knowledge, this paper provides the most comprehensive analysis of firm-level corporate income tax expenses to date. We use publicly available financial statement information to estimate firm-level effective tax rates (ETRs) for 10,642 corporations from 85 countries from 1988 to 2007. We find that multinationals and domestic-only companies face similar ETRs. We also find that, on average, ETRs declined by seven percentage points or 20% over the period. German, Japanese, Australian and Canadian decreases were large. American, British, and French declines were more modest. Nonetheless, because ETRs were falling worldwide, the ordinal rank from high-tax countries to low-tax countries changed little. Japanese firms always faced the highest ETRs. ETRs for tax havens and countries from the Middle East and Asia (ignoring Japan) were always lower than those for the U.S. and European countries. These findings should provide some empirical underpinning for ongoing policy debates about the taxation of multinational profits.

Suggested Citation

  • Kevin S. Markle & Douglas Shackelford, 2009. "Do Multinationals or Domestic Firms Face Higher Effective Tax Rates?," NBER Working Papers 15091, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:15091
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    Cited by:

    1. Cooper, Maggie & Nguyen, Quyen T.K., 2020. "Multinational enterprises and corporate tax planning: A review of literature and suggestions for a future research agenda," International Business Review, Elsevier, vol. 29(3).
    2. Cooper, Maggie & Nguyen, Quyen T.K., 2019. "Understanding the interaction of motivation and opportunity for tax planning inside US multinationals: A qualitative study," Journal of World Business, Elsevier, vol. 54(6), pages 1-1.
    3. Huber, Hans-Peter & Maiterth, Ralf, 2019. "Steuerbelastung deutscher Kapitalgesellschaften von lediglich 20 % - Fakt oder Fake News?," arqus Discussion Papers in Quantitative Tax Research 246, arqus - Arbeitskreis Quantitative Steuerlehre.
    4. Kevin S Markle, 2012. "A Comparison of the Tax-motivated Income Shifting of Multinationals in Territorial and Worldwide Countries," Working Papers 1206, Oxford University Centre for Business Taxation.
    5. Lee, Namryoung & Swenson, Charles, 2012. "Are Multinational Corporate Tax Rules as Important as Tax Rates?," The International Journal of Accounting, Elsevier, vol. 47(2), pages 155-167.
    6. Sinclair Davidson, 2012. "Treasury Forecasts of Company Tax Revenue: Back of the Envelope or Back to the Drawing Board?," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 19(2), pages 53-62.
    7. Walter Schmitting & Arnt Wöhrmann, 2013. "Konsequenzen der Datenbankwahl für die empirische Forschung mit Archivdaten," Schmalenbach Journal of Business Research, Springer, vol. 65(6), pages 553-587, November.
    8. Finér, Lauri & Ylönen, Matti, 2017. "Tax-driven wealth chains: A multiple case study of tax avoidance in the finnish mining sector," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 48(C), pages 53-81.
    9. Giorgia Maffini, 2009. "Tax Haven Activities and the Tax Liabilities of Multinational Groups," Working Papers 0925, Oxford University Centre for Business Taxation.
    10. repec:col:000093:012622 is not listed on IDEAS
    11. Peter Greagg & Dean Parham & Pero Stojanovski, 2010. "Disparities in average rates of company tax across industries," Economic Roundup, The Treasury, Australian Government, issue 2, pages 91-103, July.

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    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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