Do Multinationals or Domestic Firms Face Higher Effective Tax Rates?

48 Pages Posted: 20 Jun 2009 Last revised: 22 Sep 2012

See all articles by Kevin Markle

Kevin Markle

University of Iowa - Henry B. Tippie College of Business

Douglas A. Shackelford

University of North Carolina Kenan-Flagler Business School; National Bureau of Economic Research (NBER)

Date Written: June 2009

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

Markle, Kevin and Shackelford, Douglas A., Do Multinationals or Domestic Firms Face Higher Effective Tax Rates? (June 2009). NBER Working Paper No. w15091. Available at SSRN: https://ssrn.com/abstract=1422969

Kevin Markle

University of Iowa - Henry B. Tippie College of Business ( email )

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Douglas A. Shackelford (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

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