台灣上市（櫃）公司實施兩稅合一前有效稅率決定因素之研究
Other Title
Factors Influencing Corporate Effective
Tax Rates in Taiwan
Tax Rates in Taiwan
Date Issued
1999
Date
1999
Author(s)
DOI
882416H002037
Abstract
This paper examines factors influencing corporate effective tax
rates in Taiwan.We test empirically whether differences in effective
corporate tax rates between Taiwan firms can be systematically related
to the characteristics of firms.Although Taiwan firms are currently
taxed at a statutory income tax rate of 25%, few of them actually pay taxes at this rate. Taiwan tax laws institutes numerous tax incentives
and special provisions that effectively lower the tax burdens for many
firms below the statutory rate.Since accounting and public finance
researchers usually use effective tax rates as an instrument to evaluate
the fairness of tax system and possible distortion in resource
allocation,corporate tax rate,as a result,is one of the main issues
in tax policy debate.Taiwan tax laws provide significant tax
preferences for many corporations,especially for firms investing
heavily in R&D and high-tech equipment.Based on tax laws and
literatures,we investigate the relation between ETR and corporate
characteristics including firm size,R&D expenditure,leverage,fixed
assets,inventory,stock holding of insiders,profitability,long-term
equity investment,and the number of controlled subsidiaries.Univariate
tests and multivariate regressions are both employed to assess the
effects of the possible explanatory variables.In addition,we
controlled for firms ’industry membership because corporate
characteristics might differ systematically by industry.Finally,we
also test the impact of the 1986 tax reform to explore whether the
association between ETR and corporate characteristics is changed after
the adoption of value-added tax and the reduction of business income tax
rate in 1986.
Evidence that corporate ETRs vary across firms and over time has
been used in support to suggest that the tax system is inequitable,and
as a justification for initiating a tax reform.Given the focus of the
tax policy debates,several studies have attempted to examine whether
ETRs are systematically related to firm size.The results of prior
studies have been mixed;some studies observed a negative association
between ETRs and firm size,others showed a positive relation and still
others,no association.However,most of these studies are limited in
that these studies tend to examine the ETR-size relation in a univariate
setting,which potentially creates the problem of omitted variable bias.
In other words,the interaction between size and corporate
characteristics could confound prior empirical results,thus
multivariate research design should be considered to assess factors
affecting variations in ETR among companies.
This paper attempts to provide new evidence on the determinants of
the ETRs of Taiwanese listed companies in a multivariate setting,using
micro-level longitudinal (panel)data.To control for individual firm
and time heterogeneity and reduce omitted variable bias,two-way fixed
effect models are employed in this paper.We found that the fixed effect
models outperformed both the OLS models and the random effect models.We
also test the robustness of our results to alternate econometric methods.
The main empirical results are as follows.
First,the average ETR of listed companies in Taiwan from 1981 to
1996 is 14.1%lower than the statutory highest tax rate 25%and varies
from 7.7%to 19.3%across industries.
Second,corporate ETRs are associated with many firm-specific
characteristics such as size,R&D expenditure,leverage,asset mix,
profitability and long-term equity investment.The empirical results
show that size does play an important role in explaining differences
corporate tax rate,and the larger the size of the firm the lower the
tax burden.This finding is consistent with political power hypothesis.
It is found that there is a negative relation between R&D expenditure
and ETR.Firms with a larger proportion of R&D expenditure tend to have
lower ETRs as a result of tax preferences.With regard to the financing
decision variable,there is no significant association between leverage
and ETR.Furthermore,the results for the asset mix variables provide
evidence that firm with a greater proportion of inventory tend to have
higher ETRs due to no tax shields.In addition,firms with the lowest
effective tax rates tend to have larger long-term equity investment
owing to tax preferences and tax planning.
Third,our results show the implementation of the 1986 tax reform,
which reduced the highest statutory business tax rate from 30%to 25%
and adopted the value-added tax,decreases corporate tax burdens.The
ETRs of larger companies have been lower than smaller companies since
1986.This finding provides the evidence of tax distortion and inequity;
on the other hand,it also indicates the policy effects of the tax
incentives.
Subjects
corporate effective tax rate
tax policy
tax preference
panel data
fixed effect model
Publisher
臺北市：國立臺灣大學會計學系暨研究所
Type
report
File(s)![Thumbnail Image]()
Loading...
Name
882416H002037.pdf
Size
131.39 KB
Format
Adobe PDF
Checksum
(MD5):98a24c9b35bab057e06aee63a906b9e0