Multinational Corporations’ Effective Tax Rates: Evidence from Orbis

Garcia-Bernardo J., Jansky P. and Tørsløv T. (2020): "Multinational Corporations’ Effective Tax Rates: Evidence from Orbis" IES Working Papers 20/2020. IES FSV. Charles University.

Posted: 22 Jul 2020 Last revised: 22 Dec 2020

See all articles by Javier Garcia-Bernardo

Javier Garcia-Bernardo

University of Amsterdam - Amsterdam Institute for Social Science Research (AISSR)

Petr Jansky

Charles University in Prague, Faculty of Social Sciences, Institute of Economic Studies

Thomas Tørsløv

University of Copenhagen

Date Written: June 17, 2020

Abstract

Effective tax rates (ETRs) estimated from the balance sheet data of multinational corporations (MNCs) are useful for comparing MNCs’ corporate income taxation across countries. In this paper we propose a new methodological approach to estimate ETRs as reliably and as for as many countries as possible using Orbis’ unconsolidated data for the 2011–2015 period. We focus on countries with at least 50 available companies, which results in a sample of 50, mostly European, countries. We estimate the ETR of a country as the ratio of corporate income tax to gross income for all affiliates of MNCs in that country, weighted by gross income. We propose four ETR estimations, including lower and upper bounds, which differ by gross income calculation. We find that ETRs substantially differ from statutory rates for some countries. For example, we show that despite similar statutory rates of 28% and 29%, MNCs in Luxembourg paid as little as 1–8% of gross income in taxes while those in Norway paid as much as 45–66%. Despite being the best available, existing data is still imperfect, and we therefore call for better data in the form of MNCs’ unconsolidated, public country-by-country reporting data.

Keywords: effective tax rate; multinational corporation; foreign direct investment; profit shifting; tax haven; tax competition

JEL Classification: C81; F21; F23; H25; H26

Suggested Citation

Garcia-Bernardo, Javier and Jansky, Petr and Tørsløv, Thomas, Multinational Corporations’ Effective Tax Rates: Evidence from Orbis (June 17, 2020). Garcia-Bernardo J., Jansky P. and Tørsløv T. (2020): "Multinational Corporations’ Effective Tax Rates: Evidence from Orbis" IES Working Papers 20/2020. IES FSV. Charles University. , Available at SSRN: https://ssrn.com/abstract=3638376

Javier Garcia-Bernardo

University of Amsterdam - Amsterdam Institute for Social Science Research (AISSR) ( email )

Amsterdam Roeterseilandcampus
Nieuwe Achtergracht 166
Amsterdam, 1018 WV
Netherlands

Petr Jansky (Contact Author)

Charles University in Prague, Faculty of Social Sciences, Institute of Economic Studies ( email )

Opletalova St. 26
Prague, 11000
Czech Republic

HOME PAGE: http://ies.fsv.cuni.cz/en/staff/jansky

Thomas Tørsløv

University of Copenhagen ( email )

Nørregade 10
Copenhagen, DK-1165
Denmark

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