Search Results (54)

This study provides empirical evidence of tax-induced profit-shifting by multinational corporations (MNCs) operating in Morocco, an underexplored developing country context characterized by notable tax arbitrage potential. Using a micro-level panel dataset of foreign-owned subsidiaries from 2014 to 2023, we employ a pseudo-ordinary least squares (POLS) framework to examine how corporate income tax (CIT) differentials affect subsidiaries’ earnings before interest and taxes (EBIT). The results indicate that higher CIT differentials significantly reduce reported profits, supporting the indirect evidence on corporate profit-shifting behaviour. Our findings also document that the effect of the CIT differential on EBIT is moderated by firm capitalization. However, contrary to investment distortion theory, subsidiaries do not reduce investment in response to higher effective capital costs. This study also assesses the impact of Morocco’s implementation of BEPS, the COVID-19 shock, and institutional quality indicators on subsidiaries’ reported EBIT. The findings highlight the strategic role of capital structure and governance in shaping MNCs’ tax-motivated behaviour. This study contributes to the literature on international taxation and corporate finance and offers important policy implications for developing economies seeking to balance revenue integrity, investment incentives, and robust anti-avoidance enforcement. Full article

This study explores the applicability of the Laffer Curve in the context of the European Union (EU) by analyzing the relationship between taxation and fiscal revenue across personal income tax (PIT), corporate income tax (CIT), and value-added tax (VAT). Utilizing a comprehensive panel data set spanning 1995 to 2022 across all 27 EU member states, the research also integrates the Bird Index to assess fiscal effort and employs advanced econometric techniques, including the Hausman Test and log-quadratic regression models, to capture the non-linear dynamics of the Laffer Curve. The findings reveal that excessively high tax rates, particularly in some larger member states, may lead to revenue losses due to reduced economic activity and tax evasion, highlighting the existence of optimal tax rates that maximize revenue while sustaining economic growth. By estimating threshold tax rates and incorporating the Bird Index, the study provides a nuanced perspective on tax efficiency and fiscal sustainability, offering evidence-based policy recommendations for optimizing tax systems in the European Union to balance revenue generation with economic competitiveness. Full article

The global maritime industry faces a conflict between economic competition and sustainability standards. Economic pressure often incentivizes ship registries toward regulatory leniency, degrading environmental and social standards. Traditional static models often overlook how current flag choices impact future inspection risks and financing costs. To address this, we propose a Deep Reinforcement Learning framework that models flag selection as a sequential decision problem. Using a Markov Decision Process, we integrate economic, environmental, and social rewards. We analyze Port State Control records, AIS data, and 27 policy factors to quantify policy effectiveness within the simulation environment. The results show significant heterogeneity in policy performance. Reducing corporate income tax yielded the highest reward improvement (+131.37, p < 0.001). This suggests that, within the model, economic viability serves as a foundation for environmental investments. Enhanced safety standards also generate significant value (+58.35, p < 0.001) by reducing accident penalties and improving reputation metrics. Conversely, increasing tonnage taxes incentivizes the agent toward registries with lax oversight (−87.61, p < 0.001). These findings demonstrate that economic competitiveness and sustainability are mutually reinforcing. This framework provides maritime administrations with a “policy sandbox” for evidence-based decision-making, enabling a transition to sustainability without sacrificing competitiveness. Full article

The present study examines the relationship between economic growth and the tax burden that is formed as a result of income taxes. The main goal is to verify whether there is a link between these research variables in the long run and if this is confirmed, to analyze the manner in which these processes interact. The research applies a range of econometric techniques, including stationary tests, pairwise Granger causality test, Johansen cointegration test, impulse functions, and variance decompositions in order to investigate causality in the short- and long-term. The study is based on 49 observations and covers four European Union (EU) member states (Bulgaria, Hungary, Romania, and Estonia), which continue to impose a proportional (flat) tax on personal and corporate income. The analysis relies on quarterly data for the period 2013Q1–2025Q1. The results obtained are quite heterogeneous, which can be explained by the significant differences in the tax policy pursued, as well as by a number of other features determining the growth of national economies. Full article

In a global context characterized by budgetary pressures, aging populations, and accelerated economic transitions, the capacity of countries to mobilize stable and sustainable tax revenues represents a crucial pillar for maintaining macroeconomic stability and social cohesion. This research investigated the determinants of total tax revenues in the developed economies of the G7 group (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) during the period 2000–2022, employing both static and dynamic panel econometric approaches. The estimated model considered total tax revenues as the dependent variable, while the explanatory variables encompassed the main categories of government revenues: direct taxes (personal and corporate income), indirect taxes (consumption, trade, and other taxes), social contributions, grants, other non-tax revenues, and institutional quality indicators (regulatory quality and control of corruption). The empirical findings revealed that all tax components analyzed exert a positive and significant influence on total tax revenues, with particularly strong effects observed for consumption taxes, social contributions, and personal income taxes. Based on these results, the study provides policy recommendations aimed at diversifying revenue sources, balancing direct and indirect taxation, and broadening the tax base equitably. The study advances the literature on international taxation by offering an integrated and comparative analysis of the revenue structures in advanced economies, while also identifying relevant pathways for sustainable tax reforms in a dynamic global environment. Full article

The enhancements of tax policies and their coordination have emerged as a significant way to promote corporate sustainability, especially in developing economies worldwide. Using panel data from Chinese non-financial A-share listed companies from 2009 to 2022, this study empirically explores the promoting effects of corporate income tax (CIT) incentives and environmental protection tax (EPT) levies on corporate ESG performance. We find that the CIT incentive has a notable positive impact on firms’ ESG behavior, acting on the micro-mechanisms of increasing corporate cash flow and reducing agency costs, and its promoting effect is more salient with regard to the social and governance dimensions. This study also traces the interactive effects between the EPT levy and CIT incentive policies, which boost corporate ESG behavior synergistically. Heterogeneity analyses reveal that these effects are more noticeable in manufacturing firms and non-state-owned firms with severe financing constraints. Environmental tests show that CIT incentive policies have positive effects on green technological innovation, and Chinese enterprises are still experiencing relatively serious negative impacts. The conclusions of this study are conducive to providing theoretical support and policy suggestions for encouraging the sustainable development of companies through the policy combination of environmental regulation and tax incentives. Full article

Temporary book-tax differences (BTDs) serve as critical proxies for understanding corporate earnings management and tax planning. However, the drivers of large negative BTDs (LNBTDs)—where book income falls below taxable income—remain underexplored. This study investigates the determinants and components of LNBTDs, focusing on their relationship with deferred tax assets (DTAs) and liabilities (DTLs). Utilizing hand-collected data from the tax disclosures of S&P 500 firms’ 10-K filings (2007–2023), I analyze 4685 firm-year observations to identify specific accounting items driving LNBTDs. Findings reveal that deferred revenue, goodwill impairments, R&D, CapEx, environmental obligations, pensions, contingency liabilities, leases, and receivables are significant contributors, often generating substantial DTAs due to timing mismatches between book and tax recognition. Notably, high-tech industries, like the pharmaceutical, medical, and computers and software industries, exhibit pronounced LNBTDs, driven by upfront revenue recognition for tax purposes and deferred recognition for financial reporting, capitalization, amortization and depreciation effects, and other deferred tax components. Regression analyses confirm strong associations between these components and LNBTDs, with asymmetry in reversal patterns suggesting that initial differences do not always offset symmetrically over time. While prior research emphasizes large positive BTDs and tax avoidance, this study highlights economic and industry-specific characteristics as key LNBTD drivers, with limited evidence of earnings manipulation via deferred taxes. These insights enhance the value relevance of deferred tax disclosures and offer implications for reporting standards, tax policy, and research into BTD dynamics. Full article

Divergences in tax policies are evident among European OECD economies, due to varying priorities of efficiency vs. equity, influenced by the forms of direct vs. indirect taxation. The special interest of this paper is to identify how different tax forms (direct—corporate and personal income taxes (CIT, PIT); and indirect—value added tax (VAT)) affect inequality in European OECD economies in the period 2003–2020. Using heterogeneous non-stationary panel models and the (Pooled) Mean Group (PMG/MG) methods of estimation, a long-run negative relationship between direct tax forms (CIT, PIT) and the Gini coefficient was discovered, meaning that utilizing progressive direct tax forms resulted in more equity. The error-correction terms are heterogeneous, showing that developed economies decrease income inequality by using direct taxes more efficiently than emerging European OECD economies. The short-run statistically significant relationships between VAT and the Gini coefficient are discovered, meaning that certain European OECD economies effectively use VAT revenue to achieve greater equity in society. This study demonstrates that the use of indirect tax forms may be beneficial in terms of collecting more tax revenues, and that using them for redistributive programs can reduce inequality while maintaining economic efficiency. Full article

The United Kingdom has had a series of unsuccessful attempts at securing land value capture in 1909, 1947, 1967, and 1975. The 1909 land duties would have taxed increases in land values irrespective of the source. The latter three combined public bodies, acquiring development land with levies on developers. For them, value uplift was limited to that arising from the granting of planning consent. None of the measures were fully implemented and were reversed by incoming governments. One of the key problems with value capture policies has been the lack of political consensus. Since 1979, consensus has developed around the use of three types of value capture instruments. Development corporations have been created for the regeneration of local areas by acquiring development land and improving it. Local authorities have been able to use planning obligations and community infrastructure levies to oblige developers to mitigate externalities. Governments have made it clear that these are not to be used as value capture devices and therefore are really applications of the polluter pays principle. Thirdly, there are national taxes that fall on increases in the value of land, namely, business rates, stamp duty land tax, capital gains tax, and inheritance tax. Full article

Corporate taxation assumes a pivotal role in all economies, as it constitutes a substantial source of revenue for governmental agencies tasked with fulfilling social obligations. Nonetheless, modifications in financial policies and the unpredictability of macroeconomic factors result in a significant decline in this vital revenue source for the government. This study examines the financial determinants influencing corporate tax revenue in Nigeria from 1990 to 2022. In this analysis, the broad money supply, access to credit by the private sector, borrowing costs, and exchange rates are utilized as independent variables, while corporate tax revenue serves as the dependent variable. Data pertinent to this investigation on corporate income tax are sourced from the Federal Inland Revenue Service, whereas information regarding the broad money supply and credit extended to the private sector is acquired from the Central Bank of Nigeria. Additionally, statistical data on interest and exchange rates are gathered from the World Bank. This investigation applies autoregressive distributed lag and error correction models, acknowledging the existence of a long-term relationship within the series. The significant findings indicate that the broad money supply positively and significantly affects corporate income tax in the short run, but this effect diminishes to a positively insignificant level in the long run. Additionally, the interest rate is shown to have a significant harmful effect on corporate tax income in the short run, while it becomes negatively insignificant over the long term. Other financial policy factors do not significantly account for changes in corporate income tax. This study suggests the formulation of financial policies that are advantageous to corporate organizations, particularly through the reduction in borrowing costs, to facilitate business growth and enhance the government’s ability to collect substantial corporate tax revenue. The originality of this research is apparent in its utilization of financial policy instruments to illustrate the effectiveness of financial guidelines on corporate tax receipts and to argue for particular amendments that are essential when these guidelines prove detrimental to business activities. Full article

While achieving common prosperity necessitates a focus on the efficiency and equity of the primary income distribution, income inequality persists in China. As a critical tax incentive mechanism, China’s Accelerated Depreciation Policy (ADP) of fixed assets not only promotes important changes in corporate productivity and production methods but also significantly influences the primary income distribution within enterprises. However, current research offers a limited understanding of the importance of the ADP in the primary income distribution. Given that the core of the primary distribution lies in adjusting the labor income share, we regard 2014’s ADP as an exogenous “quasi-natural experiment”. After theoretically analyzing this policy’s effect on the labor income share of enterprises, our use of difference in differences (DID) validates our theoretical expectations with respect to China’s A-share listed companies during 2010–2022. The results show that the ADP can significantly increase enterprises’ labor income share; all hypotheses proved to be robust. The analysis of mechanisms shows that the ADP mainly affects the labor income share as it upgrades the corporate human capital structure as well as rent-sharing. Analyzing for heterogeneity, we find that positive effects due to the ADP affecting the labor income share are more prominent among private enterprises, medium and small-sized firms, companies with high financing constraints, capital-intensive industries, manufacturing enterprises, and those with a high level of skilled labor. The conclusions of this study contribute to uncovering the impacts of the ADP on income distribution, offering a clearer identification of particular mechanisms explaining the ADP’s effect on the labor income share. It holds significant theoretical value for understanding the micro-mechanisms of economic impacts generated by relevant policies. Furthermore, it provides policy insights in achieving common prosperity. Full article

This study examines whether firm managers strategically use tax avoidance to address climate risks, with a specific focus on strategies employed to reduce corporate income tax liabilities, and this study incorporates the moderating role of ESG performance and is ground in stakeholder theory to highlight the balance between sustainability and corporate profit expectations. Using the secondary data from Chinese A-listed companies during 2017–2023, the findings reveal that firms increasingly adopt tax avoidance practices in response to rising climate risks. More specifically, strong ESG performance positively moderates this relationship, underscoring its role in shaping socially and ethically responsible strategies to tackle sustainability challenges. By employing panel data analysis and addressing endogeneity through instrumental variable tests, Propensity Score Matching, and the Heckman test, this study provides robust results. These findings contribute to the literature on tax avoidance and provide practical insights for actionable ESG initiatives. For firms, these include improving transparency in tax reporting and integrating sustainability metrics into corporate ESG framework for firms. For tax authority, they involve upgrading the tax-related big data supervision system and fostering alignment between corporate practices and government policies. Full article

It is essential for achieving green and sustainable economic development by using tax incentives to promote green investment. Using the data from the seventh, eighth, ninth, and tenth Chinese Private Enterprise Surveys (CPESs) conducted by the Private Enterprise Research Group and using China’s corporate income tax reform in 2008 as a quasi-natural experiment, this paper empirically analyses the effect of tax incentives on corporate green investment based on the difference-in-difference models. The research results show that tax incentives can significantly increase corporate green investment. The mechanism test shows that easing financing constraints is an important channel for tax incentives to promote corporate green investment. In addition, the role of tax incentives in promoting green investment varies depending on the type and location of the enterprise. Relatively speaking, tax incentives have a stronger effect in promoting green investment for corporates with low sales revenue, located in the eastern region, heavy pollution, and high innovation capability. By doing placebo tests and changing measurement methods of indicators for robustness tests, the conclusions of this paper are still valid. Therefore, the government should increase tax incentives to better promote corporate green investment. Full article

The tax burden significantly influences corporate sustainability, making the study of the impact of supply chain transaction volatility on corporate tax burden crucial for alleviating tax pressures and promoting healthy corporate development. Using a sample of A-share listed companies in China from 2013 to 2019, we find the following: (1) Overall, supplier transaction volatility significantly increases corporate tax burden, while customer transaction volatility does not have an effect, a finding that remains robust under various tests for endogeneity. (2) Mechanism analysis reveals that supplier transaction volatility raises the level of corporate tax burden by increasing operational risk and relationship maintenance costs. (3) Further analysis indicates that the volatility of major supplier transactions exacerbates corporate income tax burdens, while the impact of customer transaction fluctuations on the tax burden is more pronounced for non-state-owned enterprises, and state-owned enterprises experience a suppressive effect on value-added tax from customer transaction volatility. This study clarifies the tax burden dynamics among supply chain firms, expands the literature on the determinants of corporate tax burdens and the economic consequences of transaction volatility, and provides insights for promoting corporate sustainability. Full article

This paper aims to demonstrate how machine deep learning techniques lead to relatively accurate forecasts of quarterly corporate income tax payments. Using quarterly data from Compustat for all U.S. publicly traded corporations from 2000 to 2024, I show that neural nets, the tree method, and random forest models provide robust forecasts despite their encompassing COVID-19 pandemic time periods. The results should be of interest to corporate tax planners, stock analysts, and governments. Full article