• The Effects of Tax Reform on Corporate Effective Tax Rates: Moderated by Industry and Firm-Specific Characteristics

Abstract

The main purpose of this paper is to study the fairness of tax burden for tax reform. The effective tax rate (ETRs) is used to measure the tax burden on businesses. The study examines whether the tax reform, a reduction of profit-seeking enterprise income tax rate and the implement of the Statute for Industrial Innovation, had an effect on ETRs, and if it impacted on the associations between ETRs and variables reflecting the firm-specific characteristics (capital intensity and R & D intensity) and industry properties (high-tech industries and traditional industries).

The evidence suggests that the scale-back or withdrawal of tax incentives after the Statute for Industrial Innovation in lieu of the Statute for Upgrading Industry has increased tax burdens. However, the reduction in the business income tax rate has lowered ETRs. A study on the impact of tax reforms in the context of firm specifics and industry characteristics finds that the tax burdens have increased for capital-intensive, R&D- spendingintense and high-tech companies. In other words, tax reforms can resolve the problems associated with the concentration of tax incentives to high-tech industry and ensure a fairer taxation system and a more balanced development of industries.

Keywords: Profit-Seeking Enterprise Income Tax, Effective Tax Rates, Tax Reform, Tax Incentives