The Effective Average Tax Burden in the European Union and the USA: A Computer-Based Calculation and Comparison with the Model of the European Tax Analyzer

43 Pages Posted: 9 Nov 2003

See all articles by Otto H. Jacobs

Otto H. Jacobs

University of Mannheim - School of Business Administration (BWL)

Christoph Spengel

Centre for European Economic Research (ZEW)

Date Written: September 1999

Abstract

In this paper we present a computer-based model (so-called European Tax Analyzer) for the international computation and comparison of company tax burdens. The methodology follows the forward-looking concepts for the measurement of effective average tax rates (EATR) on the basis of a model-firm. The EATR is computed for investments generating economic rents (i.e. pure profits above the market interest rate). In contrast to the prevailing approaches for calculating EATR based on separate and isolate investment projects the model-firm approach allows to calculate EATR for more complex and realistic conditions that are relevant for the decision making. Due to its flexibility another important advantage of the model-firm approach is the possibility to include the most relevant and complex provisions of the tax codes (i.e. tax systems, taxes, tax rates, and tax bases). A concrete computation and comparison of the EATR of corporations and their shareholders in five different countries reveals the wide spread between the national EATR. Moreover, for the time series 1995-2000 it could be shown that the differences between the EATR have declined a little. In spite of this convergence, however, tax distortions of competition did not become significantly less.

Keywords: Tax burden comparison, capital income taxation, tax competition, tax harmonization in Europe

Suggested Citation

Jacobs, Otto H. and Spengel, Christoph, The Effective Average Tax Burden in the European Union and the USA: A Computer-Based Calculation and Comparison with the Model of the European Tax Analyzer (September 1999). ZEW Discussion Paper No. 99-54, Available at SSRN: https://ssrn.com/abstract=376221 or http://dx.doi.org/10.2139/ssrn.376221

Otto H. Jacobs (Contact Author)

University of Mannheim - School of Business Administration (BWL) ( email )

40, Boulevard du Pont-d'Arve
Case Postale 3
1211 Geneva
Germany
++49 / (0)621 / 181 - 1703 (Phone)
++49 / (0)621 / 181 - 1707 (Fax)

Christoph Spengel

Centre for European Economic Research (ZEW) ( email )

D-68161 Mannheim
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
399
Abstract Views
2,240
rank
88,650
PlumX Metrics