61 Pages Posted: 11 Nov 2014 Last revised: 26 Aug 2016
Date Written: August 25, 2016
We investigate systematic changes in corporate effective tax rates over the past 25 years and find that effective tax rates have decreased significantly. Contrary to conventional wisdom, we find that the decline in effective tax rates is not concentrated in multinational firms; effective tax rates have declined at approximately the same rate for both multinational and domestic firms. Moreover, we find that within multinational firms, both foreign and domestic effective rates have decreased. Finally, we find that changes in firm characteristics and declining foreign statutory tax rates explain little of the overall decrease in effective rates. The findings have broad implications for research, as well as for current policy debates about reforming the corporate income tax.
Keywords: Corporate tax rates, tax avoidance, trend
Suggested Citation: Suggested Citation
Dyreng, Scott and Hanlon, Michelle and Maydew, Edward L. and Thornock, Jacob R., Changes in Corporate Effective Tax Rates Over the Past Twenty-Five Years (August 25, 2016). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2521497 or http://dx.doi.org/10.2139/ssrn.2521497