Turnover-Based Corporate Income Taxation and Corporate Risk-Taking

39 Pages Posted: 2 Oct 2023 Last revised: 21 Dec 2023

See all articles by Harald Amberger

Harald Amberger

Vienna University of Economics and Business

Fernando Siahaan

WU Vienna University of Economics and Business

Caren Sureth-Sloane

Paderborn University; Vienna University of Economics and Business; TRR 266 Accounting for Transparency

Date Written: September 30, 2023

Abstract

This study investigates the effect of a Turnover-based Corporate Income Tax (TbCIT) on corporate risk-taking. TbCIT is a simplified presumptive tax levied on a firm’s turnover and commonly applied to SMEs and hard-to-tax income. Using a rich sample of Indonesian firms for the years 2009 to 2021, we provide evidence that corporate risk-taking is negatively associated with a firm’s TbCIT exposure. The negative effect is stronger for firms in industries with high profit margins and firms with prior year losses. However, we find no association between risk-taking and the effective TbCIT rate. Overall, our findings extend prior research on the effects of limited risk sharing between taxpayers and the government by showing that turnover-based taxation can depress corporate risk-taking. Our study also informs policymakers about potential unintended consequences of adopting simplified, turnover-based tax regimes.

Keywords: turnover-based tax, corporate income tax, risk-taking, SMEs taxation

JEL Classification: H25, H32, G32, O53

Suggested Citation

Amberger, Harald Johannes and Siahaan, Fernando and Sureth-Sloane, Caren, Turnover-Based Corporate Income Taxation and Corporate Risk-Taking (September 30, 2023). WU International Taxation Research Paper Series No. 2023-09, TRR 266 Accounting for Transparency Working Paper Series No. 135, Available at SSRN: https://ssrn.com/abstract=4589055 or http://dx.doi.org/10.2139/ssrn.4589055

Harald Johannes Amberger

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Fernando Siahaan (Contact Author)

WU Vienna University of Economics and Business ( email )

Welthandelsplatz 1, Building D1, 3rd Floor
Vienna, 1020
Austria

Caren Sureth-Sloane

Paderborn University ( email )

Warburger Str. 100
Paderborn, 33098
Germany

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

TRR 266 Accounting for Transparency ( email )

Warburger Straße 100
Paderborn, 33098
Germany

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