Zero-Tax Firms

60 Pages Posted: 20 Apr 2020

See all articles by Jesse van der Geest

Jesse van der Geest

Tilburg University

Martin Jacob

University of Navarra, IESE Business School

Date Written: March 25, 2020


We study profitable firms with no tax expenses. We find that the proportion of profitable firms that owe zero taxes (zero-tax firms) has increased substantially over the past 70 years, accounting for almost 15% of listed U.S. firms in recent years. Zero-tax firms thus represent a major group of tax avoiders. However, we find that zero-tax firms avoid taxes using nonaggressive means: loss-related deductions and nontaxable income are important factors, whereas international tax avoidance plays a minor role. This paper further demonstrates that the large share of zero-tax firms can potentially drive results and affect inferences in tax avoidance studies. Taken together, we show that zero-tax firms are a unique and important subset of tax avoiders.

Keywords: ETR, tax avoidance, rate reconciliation, tax aggressiveness, losses

JEL Classification: H25, H26

Suggested Citation

van der Geest, Jesse and Jacob, Martin, Zero-Tax Firms (March 25, 2020). Available at SSRN: or

Jesse Van der Geest (Contact Author)

Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE

Martin Jacob

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034

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