An Evaluation of Alternative Measures of Corporate Tax Rates
48 Pages Posted: 25 Sep 1999
Date Written: July 1999
This paper examines the ability of financial statement measures of average and marginal tax rates to capture tax attributes utilizing a matched sample of firm-level tax return and Compustat data.
The results suggest that commonly used measures of average tax rates provide little insight about annual corporate tax burdens, and may introduce substantial bias into statistical models. Marginal tax rates proxies perform better, but there appears to be little, if any, empirical value added by methods that go beyond easily constructed measures traditionally used in the literature.
JEL Classification: G30, H25, M41, C20
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