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Size and other determinants of corporate effective tax rates in US listed companies

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F.J. Delgado at University of Oviedo
F.J. Delgado
Elena Fernández-Rodríguez at University of Oviedo
Elena Fernández-Rodríguez
Antonio Martínez-Arias at University of Oviedo
Antonio Martínez-Arias
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International Research Journal of Finance and Economics
ISSN 1450-2887 Issue 98 September, 2012
© EuroJournals Publishing, Inc. 2012
http://www. internationalresearchjournaloffinanceandeconomics.com
Size and other Determinants of Corporate Effective
Tax Rates in US Listed Companies
Francisco J. Delgado
Corresponding Author, University of Oviedo, Spain
E-mail: fdelgado@uniovi.es
Tel: +34-985104876; Fax: +34-985104871
Elena Fernandez-Rodriguez
University of Oviedo, Spain
Antonio Martinez-Arias
University of Oviedo, Spain
Abstract
This note studies the determinants of corporate Effective Tax Rates (ETR) based on
a panel of listed US companies over the period 1992-2009 (Compustat), with a special
focus on firm size. We also consider the economic and financial structure of the firms, as
well as profitability. The results indicate a non-linear relation between size and ETR, with
similar relationships also found for debt and capital intensity. This may explain the
conflicting results found in the previous literature.
Keywords: Effective Tax Rate, Corporate Tax Burden, US listed companies, firm size
JEL Classification Codes: H25, H32
1. Introduction
Most business decisions have tax implications and taxation may have significant implications for
corporate decisions, so companies should take the tax burden into account when designing their
strategies. It is therefore important to know the main determinants of the Effective Tax Rate (ETR)
borne by companies.
The corporate tax burden has been the subject of several empirical studies1 and this one focuses
on US companies. 2 For an accurate analysis of the corporate tax burden, it is best to use the ETR
because the Statutory Tax Rate (STR) is not a good indicator as it does not take into account temporary
differences, tax credits and other fiscal incentives (Government Accountability Office, 2008, p. 1).
Most research on the ETR has been aimed at identifying its determinants. However, as we show
in Section III when we perform a comparative analysis of our results, previous studies have found
conflicting results for the determinants of ETR, and in particular firm size, for both time intervals and
different samples.
1 Recently Hanlon and Heitzmanl (2010) and Graham et al. (2012) have published excellent reviews on these topics.
2 Other studies outside the US can be consulted in Fernández-Rodríguez and Martínez-Arias (2011).
International Research Journal of Finance and Economics - Issue 98 (2012) 161
This research focuses on the effect of size and other determinants on the corporate tax burden.
With this aim we analyze size both separately as well as combined with other variables which
influence taxation, such as leverage, capital and inventory intensities and the profitability. The paper
contributes to the literature on ETRs because it adopts a non-linear approach, as opposed to the linear
approach often used in previous research, and it also covers an extensive and recent period (1992-
2009). The paper is structured as follows: Section 2 presents the methodology and data, Section 3
shows the main findings and Section 4 concludes.
2. Model and Data
The definitions used in the literature for ETR vary, though almost all studies use the ratio of current
income tax expense and pretax income. 3 This is the main option used in this paper. However, in
Section III we include a sensitivity analysis with an alternative measure for ETR, the ratio of total
corporate income tax expense to pretax income.
In order to identify the determinants of ETRs, the following panel data model is used in its full
version:
it
SECTORYEAR
it
ROA
it
INVINT
it
CAPINT
it
CAPINT
it
LEV
it
LEV
it
SIZE
it
SIZE
it
ETR
10987
2
65
2
43
2
210 (1)
The model contains the explanatory variables that are traditionally used in this type of study:
Size (SIZE): the logarithm of the firm’s total assets.
Leverage (LEV): the ratio of total debt to total assets.
Capital Intensity (CAPINT): the ratio of property, plant and equipment to total assets.
Inventory Intensity (INVINT): the ratio of inventories to total assets.
Return On Assets (ROA): the ratio of earnings before income tax over total assets.
In order to capture any possible non-linearities, the squares of the most relevant variables are
also added. In addition, dummies have been included to account for the time effect (YEAR) and the
sectoral effect (SECTOR).
The data for this research was obtained from the Compustat data base, which provides
information on the financial statements of non-financial, US-listed companies for the period 1992-
2009. The sample consists of 2,500 companies for each year, although some do not give information
for the whole period. Moreover, the companies have been classified by sector, following the Standard
Industrial Classification (SIC).
Fig. 1 shows the trend in annual ETR over the period studied. Note that the corporate tax
burden dropped from 1992 to 2004 but in 2005 there was a marked rise to a level of about 25%, where
it has remained over recent years at about 25%. The highest ETR is for the first year (28.42%) and the
lowest for 2004 (21.32%), a difference of seven points. However, the variation between the first and
the last year is less than three percentage points, which points to a fair degree of stability throughout
this long time series. The results also show a large gap between the ETR and the STR, which remained
at about 40% over the whole period. Table 1 shows the descriptive statistics for the variables used in
the model (1a) and the correlation matrix (1b).
3 See the surveys by Callihan (1994) and Plesko (2003).
162 International Research Journal of Finance and Economics - Issue 98 (2012)
Figure 1: Annual versus mean corporate effective tax rates (1992-2009)
Source: Compustat and own elaboration
Table 1: Descriptive Statistics and correlation matrix
A) Descriptive statistics
ETR SIZE LEV CAPINT INVINT ROA
Mean 0.2542 5,9927 0.3989 0.2817 0.1222 0.0113
Median 0.2836 5,9819 0.3942 0.2137 0.0831 0.0630
Standard deviation 0.1883 2,0957 0.2040 0.2324 0.1344 0.2357
Minimum 0.0000 -6,9078 0.0000 0.0000 0.0000 -1.6740
Maximum 1.0000 13,5896 1.0000 1.0000 0.9206 0.4137
N.Observations 25,751 37,498 36,271 34,525 33,326 33,830
B) Correlation matrix
VARIABLE ETR SIZE LEV CAPINT INVINT ROA
ETR
SIZE 0.315***
LEV 0.049*** 0.222***
CAPINT -0.008 0.235*** 0.187***
INVINT 0.221*** -0.063*** 0.125*** -0.157***
ROA 0.461*** 0.349*** -0.016*** 0.120*** 0.157***
***, **, * denotes statistical significance at the 1%, 5% and 10% levels, respectively.
Source: Compustat and own elaboration
3. Empirical Results
The main results, which come from the fixed effect model, are shown in Table 2. 4 In order to study the
SIZE-ETR relation (1) in greater depth, the model was estimated including other variables such as
leverage (2), capital intensity (3), inventory intensity (4) and Return On Assets (5). Finally, the full
4 The F-test and the Pagan Lagrange Multiplier test were performed and indicated the presence of individual effects and the
advisability of using panel data rather than the pooled model. The Hausman test was then applied. It advised the fixed
effects model rather than the random effects model.
International Research Journal of Finance and Economics - Issue 98 (2012) 163
model was estimated including all the variables mentioned (6). This gives a good fit in comparison
with previous research.
The entity size variable was significant in all the models estimated, showing non-linear
behavior characterized by a positive coefficient for values which are low in size and a negative one for
high size levels. The former is consistent with the government control hypothesis which predicts higher
ETRs for larger companies because of tighter control of their results and taxes. The second supports
the hypothesis of greater fiscal planning on the part of larger companies with a view to reducing their
tax burden. Since this is a sample of large companies, as they are all listed on the Stock Exchange, the
results therefore show that the effect of fiscal planning is greater than government control after a
certain size.
Size is the variable that has been most extensively studied in previous research on corporate
taxation, either alone or in combination with other variables, with varying results. Some studies found
a positive relation between size and ETR (Zimmerman, 1983; Wang, 1991; Omer et al., 1993; Plesko,
2003), but others found the opposite (Porcano, 1986; Chen et al., 2010). There were even studies that
found no significant relation between the two variables (Stickney and McGee, 1982). The diversity of
these results is perhaps explained by the presence of this non-linear relation between size and ETR,
which is maintained in all our estimates.
Moreover, there were other interesting non-linear relations with the ETR, namely those relating
to debt and capital intensity. Although in research on debt there is usually an inverse relation with ETR
(Stickney and McGee, 1982; Plesko, 2003), in some papers the opposite was found (Chen et al., 2010).
When debt is very low the deductibility of interest is probably not sufficient to lead to a drop in tax
burden. However, with high levels of debt, very high interest deductibility is able to reduce company
tax pressure.
Regarding capital intensity, the most widely-obtained result is an inverse relation with ETR
(Stickney and McGee, 1982; Gupta and Newberry, 1997), although once again not all studies have
reached the same conclusion (Plesko, 2003). Again, the change in sign in CAPINT-ETR indicates that
when levels of property, plant and equipment are low, companies are unable to reduce their tax burden.
On the other hand, after a certain level of capital intensity, companies note a reduction in ETR caused
by the deductibility of high depreciation.
Whit respect to inventory intensity, a variable that has been little used in the literature, the
results show a positive relation with ETR, as in Gupta and Newberry (1997). That is, companies that
have higher levels of stocks are subject to greater tax pressure. Finally, as in all prior research
(Stickney and McGee, 1982; Wilkie and Limberg, 1993; Gupta and Newberry, 1997; Plesko, 2003;
Chen et al., 2010), business profitability has a positive effect on tax burden.
Moreover, we have conducted a sensitivity analysis with an alternative measure of ETR,
arriving at similar conclusions (Table 3). As stated above, the new definition of ETR is the ratio of
total corporate income tax expense and pretax income, so it takes into account the deferred tax.
Table 2: Determinants of corporate effective tax rates (main measure)
Expected sign Models
(1) (2) (3) (4) (5) (6)
SIZE +/- 0.0410***
(17.01) 0.0518***
(17.57) 0.0414***
(17.13) 0.0421**
(17.21) 0.0534***
(16.11) 0.0594***
(16.34)
SIZE2 +/- -0.0012***
(-4.93) -0.0021***
(-7.58) -0.0012***
(-5.05) -0.0012***
(-4.78) -0.0022***
(-7.53) -0.0027***
(-8.27)
LEV +/- 0.1107***
(4.94) 0.1230***
(5.08)
LEV2 +/- -0.1356***
(-5.61) -0.1503***
(-5.87)
CAPINT +/- 0.0552***
(2.18) 0.0837***
(2.96)
CAPINT2 +/- -0.0775**
(-2.58) -0.1267***
(-3.85)
INVINT + 0.0937***
(5.24) 0.0982***
(4.97)
164 International Research Journal of Finance and Economics - Issue 98 (2012)
Table 2: Determinants of corporate effective tax rates (main measure) - continued
ROA + 0.0449***
(7.12) 0.0488***
(6.99)
Year Dummy Yes Yes Yes Yes Yes Yes
Sector Dummy Yes Yes Yes Yes Yes Yes
Adjusted R2 0.1876 0.2019 0.2015 0.2405 0.2583 0.3431
Nº observations 25,733 25,025 25,684 24,857 25,151 23,753
***, **, * denotes statistical significance at the 1%, 5% and 10% levels, respectively.
Table 3: Determinants of corporate effective tax rates (alternative measure)
Expected sign Models
(1) (2) (3) (4) (5) (6)
SIZE +/- 0.0453***
(25.30) 0.0572***
(26.61) 0.0452***
(28.18) 0.0460***
(25.19) 0.0538***
(22.40) 0.0581***
(22.21)
SIZE2 +/- -0.0014***
(-8.23) -0.0024***
(-12.32) -0.0014***
(-8.10) -0.0015***
(-8.30) -0.0022***
(-10.56) -0.0026***
(-11.45)
LEV +/- 0.1030***
(6.37) 0.1193***
(6.80)
LEV2 +/- -0.1362***
(-7.80) -0.1438***
(-7.76)
CAPINT +/- 0.0270
(1.46) 0.0484**
(2.38)
CAPINT2 +/- -0.0189
(-0.87) -0.0524**
(-2.23)
INVINT + 0.0537***
(4.08) 0.0530***
(3.72)
ROA + 0.0779***
(16.50) 0.0834***
(16.10)
Year Dummy Yes Yes Yes Yes Yes Yes
Sector Dummy Yes Yes Yes Yes Yes Yes
Adjusted R2 0.2919 0.2998 0.2914 0.3221 0.4242 0.4544
Nº observations 28,228 27,484 28,181 27,182 27,614 26,014
***, **, * denotes statistical significance at the 1%, 5% and 10% levels, respectively.
4. Concluding Remarks
This paper analyses the determinants of company taxation in US listed companies based on a panel for
the period 1992-2009 taken from Compustat, paying special attention to size. We consider the ETR as
the ratio of current income tax expense to pretax income; however, in order to achieve more robust
results, the estimations are also performed with an alternative measure.
Our results indicate a non-linear relation between size and ETR, with smaller companies being
subject to a greater tax burden. After a certain size, the effect of tax planning exceeds that of
government control so companies are able to reduce their ETRs. Two other very interesting non-linear
relations with ETR were obtained for debt and capital intensity, indicating that companies can only
reduce their tax pressure after certain levels of debt and capital intensity have been reached.
The conclusions drawn in this study are relevant because previous research had always
indicated linear relations between these variables and ETR, which might explain the contradictory
results in the literature.
References
[1] Callihan, D. S., 1994. “Corporate effective tax rates: a synthesis of the literature”, Journal of
Accounting Literature, 13, pp. 1-43.
[2] Chen, S., Chen, X., Cheng, T. and Shevlin, T. J., 2010. “Are family firms more tax aggressive
than non-family firms?”, Journal of Financial Economics, 95, pp. 41-61.
[3] Fernández-Rodríguez, E. and Martínez-Arias, A., 2011. “Determinants of effective tax rate:
evidence for USA and the EU”, Intertax, 39, pp. 381-395.
International Research Journal of Finance and Economics - Issue 98 (2012) 165
[4] Government Accountability Office (GAO), 2008. “Effective tax rates are correlated with where
income is reported”. Report to the Committee on Finance U. S. Senate, GAO-08-950, August
(United States). Available at http://www. gao. gov/new. items/d08950. pdf.
[5] Graham, J. R., Raedy, J. S. and Shackelford, D. A., 2012. “Research in accounting for income
taxes”, Journal of Accounting and Economics, 53, pp. 412-434.
[6] Gupta, S. and Newberry, K., 1997. “Determinants of the variability in corporate effective tax
rates: evidence from longitudinal data”, Journal of Accounting and Public Policy, 16, pp. 1-34.
[7] Hanlon, M. and Heitzman, S., 2010. “A review of tax research”, Journal of Accounting and
Economics, 50, pp. 127-178.
[8] Omer, T. C., Molloy, K. and Ziebart, D., 1993. “An investigation of the firm size–effective tax
rate relation in the 1980s”, Journal of Accounting, Auditing and Finance, 8, pp. 167-182.
[9] Plesko, G. A., 2003. “An evaluation of alternative measures of corporate tax rates”, Journal of
Accounting and Economics, 35, pp. 201-226.
[10] Porcano, T. M., 1986. “Corporate tax rates: progressive, proportional or regressive”, The
Journal of the American Taxation Association, 7, pp. 17-31.
[11] Stickney, C. P. and McGee, V. E., 1982. “Effective corporate tax rates. The effect of size,
capital intensity, leverage and other factors”, Journal of Accounting and Public Policy, 1, pp.
125-152.
[12] Wang, S., 1991. “The relation between firm size and effective tax rates: a test of firms` political
success”, The Accounting Review, 66, pp. 158-169.
[13] Wilkie, P. J. and Limberg, S., 1993. “Measuring explicit tax (dis) advantage for corporate
taxpayers: an alternative to average effective tax rates”, The Journal of the American Taxation
Association, 15, pp. 46-71.
[14] Zimmerman, J. L., 1983. “Taxes and firm size”, Journal of Accounting and Economics, 5, pp.
119-149.
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This study aims to analyze the determinants that affect the quality of financial reporting, which constitutes leverage, company size, cash flow volatility, sales volatility, company operating cycle, loss proportion, intangible asset intensity, and capital intensity. We used the WarpPLS 7.0 program in analyzing the secondary data. The sample in this study were non-financial service companies selected through the purposive sampling technique in the period 2015-2019. The research method used is the descriptive quantitative method with regression analysis. The research results showed that leverage, company size, and capital intensity had a significant and positive effect on the quality of financial reporting. Meanwhile, the operating cycle, the proportion of losses, and the intensity of intangible assets had a significant and negative effect on financial reporting quality. However, cash flow volatility and sales volatility produced an insignificant effect on the quality of financial reporting.
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... ) บัรีิ ษั ท่เหล่ านี � อ่าจใชิ� วิิ ธุี ลดัค่ าใชิ� จ่ ายภาษี จากชิ่ อ่งโหวิ่ ขึ้อ่งกฎีหมายภาษี (Hanlon & Heitzman, 2010) ท่ำให� รีั ฐบัาลส้ ญเสี ยรีายไดั� ท่ี � ใชิ� พั ฒนาปัรีะเท่ศและบัรีิ การีสาธุารีณะ จ้ งท่ำให� เกิ ดัปัฏิิ กิ รีิ ยาต่ อ่ต� านการีหลี กเลี � ยงภาษี เงิ นไดั� นิ ติ บัุ คคล (Christensen & Murphy, 2004) หลั กเกณฑิ์ ท่ี � แตกต่ างกั นขึ้อ่งกำไรีท่างบัั ญชิี ตามมาตรีฐานการีรีายงานท่างการีเงิ นและกำไรีท่างภาษี ซึ่้ � งต� อ่งเปั็ นไปัตาม ปัรีะมวิลรีั ษฎีากรี ท่ำให� เกิ ดัชิ่ อ่งโหวิ่ ท่างกฎีหมายในการีหลี กเลี � ยงภาษี เงิ นไดั� นิ ติ บัุ คคล (Lisowsky et al., 2013) (Krishnan, 2003a) ส่ งผู้ลให� บัรีิ ษั ท่มี ม้ ลค่ ากิ จการีท่ี � เพิ � มขึ้้ � น (Hart, 1995) และ ชิ่ วิยขึ้จั ดัพฤติ กรีรีมอ่งค์ ท่ี � เปั็ นแรีงจ้ งใจในการีหลี กเลี � ยงภาษี เงิ นไดั� นิ ติ บัุ คคล Hogan and Noga (2015) และ Omer et al. (2006) แสดังให� เห็ นวิ่ า คุ ณภาพการีสอ่บับัั ญชิี มี อ่ิ ท่ธุิ พลต่ อ่การีหลี กเลี � ยงภาษี เงิ นไดั� นิ ติ บัุ คคล เน่ � อ่งจากสามารีถติ ดัตาม ตรีวิจสอ่บัปัรีะสิ ท่ธุิ ภาพการีดัำเนิ นงาน เพ่ � อ่ปั้ อ่งกั นพฤติ กรีรีมไม่ พ้ งปัรีะสงค์ ขึ้อ่งผู้้ � บัรีิ หารี ซึ่้ � งเปั็ นปัั จจั ยสำคั ญท่ี � เปั็ นแรีงจ้ งใจ ในการีหลี กเลี � ยงภาษี เงิ นไดั� นิ ติ บัุ คคลขึ้อ่งบัรีิ ษั ท่ (Desai & Dharmapala, 2006, 2008 ปัรีะเท่ศไท่ยในฐานะปัรีะเท่ศกำลั งพั ฒนามี การีเติ บัโตขึ้อ่งตลาดัหลั กท่รีั พย์ อ่ย่ างมากและมี การีเติ บัโตขึ้อ่งรีายไดั� ใน ต่ างปัรีะเท่ศตลอ่ดัหลายปัี ท่ี � ผู้่ านมา (Nithichai & Kanasiriwattan, 2020) (Desai & Dharmapala, 2006, 2009bDhaliwal et al., 2004) อ่ย่ างไรีก็ ตาม Frank et al. (2009) (Dye, 1993;Kim et al., 2003;Krishnan, 2003b;Hamdan et al, 2012) (Amidu et al., 2019;Pratama & Padjadjaran, 2017;Lietz 2013;Zarai, 2013;Noor et al., 2010) คุวามเสี � ยงในการก่ อหนี � (Lev) วิั ดัค่ าจาก หนี � สิ นไม่ หมุ นเวิี ยน หารีดั� วิยสิ นท่รีั พย์ รีวิม (Kim & Im 2017;Kraft, 2014;Lietz 2013;Zarai, 2013;Noor et al., 2010) คุวามสามารถในการทำกำไร (PA) วิั ดัค่ าจาก กำไรีท่างบัั ญชิี ก่ อ่นภาษี หารีดั� วิยสิ นท่รีั พย์ รีวิม (Amidu et al., 2019;Delgado et al., 2012;Dunbar et al., 2010;Dyreng et al., 2010) การลงทุ นในสิ นทรั พิย์ ไม่ มี ติั วติน (IT) วิั ดัค่ าจากสิ นท่รีั พย์ ไม่ มี ตั วิตน หารีดั� วิยสิ นท่รีั พย์ รีวิม (Amiram et al., 2013;Markle, 2012;Dunbar et al., 2010;Dyreng et al., 2010) (Amidu et al., 2019;Kim & Im, 2017;Amiram et al., 2013;Richardson & Lanis, 2007;Phillips, 2003) การเติิ บัโติของกิ จการ (GT) วิั ดัค่ าจากการีเปัลี � ยนแปัลงยอ่ดัขึ้าย หารีดั� วิยสิ นท่รีั พย์ รีวิม (Amidu et al., 2019;Kim & Im, 2017;Phillips, 2003) ขาดทุ นจากการดำเนิ นงาน (Loss) วิั ดัค่ าเปั็ นตั วิแปัรีหุ ่ น มี ค่ าเปั็ น 1 หากมี ผู้ลขึ้าดัทุ่ น มี ค่ าเปั็ น 0 หากไม่ ใชิ่ (Amiram et al., 2013;Zarai, 2013;Dunbar et al., 2010;Richardson & Lanis, 2007) ติั วแบับัในการวิ จัั ย (Gujariti, 2003;Kumari, 2008) ...
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... Intensitas modal dapat diartikan jumlah modal perusahaan yang diinvestasikan pada aset tetap yang dapat diukur dengan menmakai rasio aset tetap dibagi dengan penjualan (Francis et al., 2005). Delgado et al. (2012) menyatakan bahwa aset tetap yang dimiliki perusahaan dimungkinkan untuk membebankan penyusutan atas aset tetap tersebut setiap tahunnya. Keadaaan ini memperlihatkan bahwa perusahaan yang memiliki aset tetap yang besar akan memperoleh keuntungan yang kecil dibandingkan perusahaan yang memiliki aset tetap yang kecil sehingga menurunkan kualitas pelaporan keuangan. ...
DETERMINANT ANALYSIS OF FINANCIAL REPORTING QUALITY OF NON FINANCIAL SERVICES COMPANIES ON THE INDONESIA STOCK EXCHANGE
Article
Full-text available
  • Jan 2022
This study aims to analyze the determinants that affect the quality of financial reporting, which constitutes leverage, company size, cash flow volatility, sales volatility, company operating cycle, loss proportion, intangible asset intensity, and capital intensity. We used the WarpPLS 7.0 program in analyzing the secondary data. The sample in this study were non-financial service companies selected through the purposive sampling technique in the period 2015-2019. The research method used is the descriptive quantitative method with regression analysis. The research results showed that leverage, company size, and capital intensity had a significant and positive effect on the quality of financial reporting. Meanwhile, the operating cycle, the proportion of losses, and the intensity of intangible assets had a significant and negative effect on financial reporting quality. However, cash flow volatility and sales volatility produced an insignificant effect on the quality of financial reporting.
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Family Firms’ Aggressive Tax Planning: An Empirical Evaluation for Italy
Article
  • Aug 2022
This paper examines whether Italy’s family firms are more or less tax aggressive than their counterparts. To this end we exploit several data sources combining firm survey data, accounts data, and tax returns available for the years 1999-2006. Results indicate that family firms are more prone to engage in aggressive tax practices than their peers. Furthermore, from an agency perspective we find that when family owners increase their degree of ownership, the majority shareholder can use his or her controlling power to extract private benefits at the expense of minority shareholders, strengthening incentives for tax avoidance. Our results are robust after controlling for several firm characteristics, tax variables reflecting adjustments of book income due to differences between financial and tax accounting, and for different metrics of tax aggressiveness.
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EFFECTIVE TAX RATE DAN FAKTOR -FAKTOR YANG MEMENGARUHI
Article
  • Aug 2020
Effective Tax Rate is the actual tax rate that must be paid by the company compared to the profit generated by the company. The company owners will encourage management to take tax aggressive actions to reduce the tax burden that arises. This study discusses whether company size, leverage and profitability are the dependent variables that can affect the effective tax rate as proxied by ETR as independent variables. The theory that underlies this research is agency theory, which discusses the relationship between owner and management where there is a conflict of interest between the two parties who want to prosper themselves, and political cost theory in which companies minimize costs to increase profits. This study uses observation techniques towards Secondary data obtained from annual financial reports and audited financial reports of manufacturing companies listed on the Indonesia Stock Exchange 2016-2018. The sample of this study were 59 manufacturing companies listed on the Indonesia Stock Exchange. The sampling technique in this study using judgment sampling. Testing data with classical assumptions and using multiple regression analysis with SPSS version 24. Keyword: Effective Tax Rate, Size, Leverage, Profitability. References: Ambarukmi, Khusniyah Tri., Nur Diana (2017), Pengaruh Size, Leverage, Profitabilitas, Capital Intensity dan Activity Ratio Terhadap Effective Tax Rate (Studi Empiris Pada Perusahaan LQ-45 Yang Terdaftar Di BEI Selama Periode 2011- 2015). Jurnal Ilmiah Riset Akuntansi, Vol.6 , p13–26. Ardyansah, Danis dan Zulaikha (2014), Pengaruh Size , Leverage , Profitability , Capital Intensity Ratio dan Komisaris Independen Terhadap Effective Tax Rate. Diponogoro Journal of Accounting, Vol.3, p1–9. Bursa Efek Indonesia, diakses 6 Desember 2020, idx.co.id. Batmomolin, Salestina. (2018). “Analisis Leverage , Firm Size , Intensitas Aset Tetap Dan Intensitas Persediaan Terhadap Tarif Pajak Efektif (Pada Perusahaan Kmia Terdaftar Di Bursa Efek Indonesia Tahun 2012-2017). Jurnal Ilmiah Buletin Ekonomi, Vol 22, p36-42. Daftar Perusahaan Manufaktur, diakses 6 Desember 2020, sahamok.com Ghozali, Imam. (2016). Aplikasi Analisis Multivariete Dengan Program IBM SPSS 23. Semarang: Penerbit Universitas Diponegoro. Hery, (2015), Pengantar Akuntansi and Comprehensive Edition, Indonesia: Gramedia Widiasarana Indonesia. Imelia, Septi. (2015). Analisis Faktor Yang Mempengaruhi Manajemen Pajak Dengan Indikator Tarif Pajak Efektif (ETR) Pada Perusahaan Lq45 yang Terdaftar Dalam Bursa Efek Indonesia Tahun 2010-2012. Jom FEKON, Vol 2, p1-15. Kasmir (2018), Analisis Laporan Keuangan, Edisi Kesebelas, Depok : Penerbit PT RajaGrafindo Persada. Kurniasari, Erni., Listiawati. (2019). Profitabilitas Dan Leverage Dalam Mempengaruhi Effective Tax Rate. Jurnal Manajemen, Vol 9 p17-29. Kurniawan, Indra Suyoto. (2019). Analisis Faktor Yang Mempengaruhi Manajemen Pajak Dengan Indikator Pajak Efektif. Fakultas Ekonomi dan Bisnis Universitas Mulawarman, Samarinda 16(2), p213–221. Putri, Amanda Nur., Gunawan. (2017). Pengaruh Size , Profitability , Dan Liquidity Terhadap Effective Tax Rates ( ETR ) Bank Devisa Periode 2010 – 2014. Jurnal Keuangan dan Perbankan, Vol 14, No 1, p18-28. Putri, Citra Lestari., Lautania, Maya Febrianty. (2016). Pengaruh Capital Intensity Ratio, Inventory Intensity Ratio, Ownership Structure Dan Profitability Terhadap Effective Tax Rate (ETR) (Studi Pada Perusahaan Manufaktur Yang Terdaftar Di Bursa Efek Indonesia Tahun 2011-2014). Jurnal Ilmiah Mahasiswa Ekonomi Akuntansi (JIMEKA), Vol 1, No 1, p101-119. Putri, Khurin’in Kurnia. (2017). Pengaruh Corporate Governance, Ukuran Perusahaan, Rasio Hutang Dan Profitabilitas Terhadap Tarif Pajak Efektif. JOM Fekon, Vol 4, No 1, p1501–1515. Republik Indonesia (2007), Undang-Undang nomor 28 tahun 2007 Undang-Undang tentang Perubahan Ketiga Atas Undang-Undang Nomor 6 Tahun 1983 Tentang Ketentuan Umum dan Tata Cara Perpajak, Sekretariat Negara Republik Indonesia (2008), Undang-Undang nomor 36 tahun 2008 Undang-Undang tentang Perubahan Ketiga Atas Undang-Undang Nomor 7 Tahun 1983 Tentang Pajak Penghasilan, Sekretariat Negara Richardson, Grant., Lanis, Roman (2007) Determinants of the Variability in Corporate Effective Tax Rates and Tax Reform : Evidence from Australia, Journal of Accounting and Public Policy 26, p689–704. Rodriguez, Fernandez Elena., Arias, Martinez Antonio (2012), Size and Other Determinants of Corporate Effective Tax Rates in US Listed Companies, International Research Journal of Finance and Economics, No.9, p160-165 Susilowati, Yeye., Ratih Widyawati., dan Nuraini (2018). Pengaruh Ukuran Perusahaan, Leverage, Profitabilitas, Capital Intensity Ratio Dan Komisaris Independen Terhadap Effective Tax Rate (Studi Empiris Pada Perusahaan Manufaktur yang Terdaftar Di Bursa Efek Indonesia pada Tahun 2014-2016). Prosiding SENDI_U, p796–804. Waluyo (2017), Perpajakan Indonesia, Edisi Keduabelas, Jakarta: Penerbit Salemba Empat. Wati, Putri., Sri Ruwanti, dan Fatahurrazak (2018). Pengaruh Chief Financial Officer Expert Power, Chief Financial Officer Political Power, Leverage, Profitability Dan Intensitas Persediaan Terhadap Tarif Pajak Efektif Pada Perusahaan Manufaktur Yang Terdaftar Di Bursa Efek Indonesia Periode 2013-2016. Jurnal Ekonomi Fakultas Ekonomi Universitas Maritim Raja Ali Haji, p1–20.
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Determinants of Effective Tax Rate: Evidence for USA and the EU
Article
This paper carries out a comparative analysis of the tax burden borne by listed companies in the United States of America and the European Union, and of the determinants of the Effective Tax Rate (ETR). A sample of companies was drawn up from the Datastream/Worldscope database over the period 1995-2007. By applying panel data estimation procedures, the main findings are, on the one hand, that ETRs are significantly lower for US firms than for European firms, and that the tax burden is determined by both the actual characteristics of the individual firm and by the tax policies adopted by governments.
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A Review of Tax Research
Article
  • Jan 2010
In this paper, we present a review of tax research. We survey four main areas of the literature: (1) the informational role of income tax expense reported for financial accounting, (2) corporate tax avoidance, (3) corporate decision-making including investment, capital structure, and organizational form, and (4) taxes and asset pricing. We summarize the research areas and questions examined to date and what we have learned or not learned from the work completed thus far. In addition, we provide our opinion as to the interesting and important issues for future research.
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An Investigation of the Firm Size—Effective Tax Rate Relation in the 1980s
Article
  • Apr 1993
Given the recent emphasis on effective tax rates by policy makers and accounting researchers, this study investigates the relation between firm size and corporate tax burdens on a yearly and an industry basis. The analysis is conducted using five effective tax measures employed in previous studies in order to determine the degree to which inferences between size and tax burden are robust across these different effective tax measures. The results indicate that the relation is fairly robust across measures and, in instances in which the relation is not upheld by our analysis, sample composition explains differences in the observed relation between firm size and corporate tax burden.
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Effective corporate tax rates the effect of size, capital intensity, leverage, and other factors
Article
The extent of neutrality of the corporate income tax system is examined empirically in this study by determining whether differences in effective corporate tax rates between major U.S. firms can be systematically related to the size of the firm, degree of capital intensity, extent of foreign operations, involvement in natural resources, and degree of leverage. Multivariate statistical tools are used to assess the combined effects of these possible explanatory variables. The empirical results show that firms with the lowest effective tax rates tend to be highly leveraged, heavily capital intensive, and involved in natural resource industries. Foreign involvement and size do not appear to play dominating roles in explaining differences in effective tax rates.
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