The Relationship Between Effective Tax Rate and Firm Size: Evidence From a Large Panel of UK Firms

The Relationship Between Effective Tax Rate and Firm Size: Evidence From a Large Panel of UK Firms

Epameinondas Katsikas (University of Kent, UK), Dimitrios Koufopoulos (University of London, UK) and Jacob Lewis (Business School, Durham University, UK)
Copyright: © 2020 |Pages: 25
DOI: 10.4018/IJCFA.2020070103
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Abstract

The current research studies firm size and other determinants of effective tax rates for UK companies operating in the wholesale and retail trade sector. A panel of 784 companies from the BvD Company Independence Indicator (BvD's FAME database) is studied over the six-year period 2008-2013. The research approach is unique in terms of the comprehensive data it is using as it is large panel data and it involves finance and accounting analytics. The analysis shows that size and profitability were significant factors affecting the average effective tax rates of companies in the wholesale and retail trade sector.
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Literature Review

This literature review should provide a comprehensive overview of the previous research carried out on possible determinants of effective tax rates. There have been many determinants proposed in previous studies to explain companies’ effective tax rate. Although the literature covers a range of these determinants this review will focus on the major ones in which there has been a significant coverage by previous research and relevant to the wholesale and retail trade sector. However, some of the determinants not used in this study will be briefly looked at. This review will also delve into the theories used by previous studies to explain why the particular determinants chosen should/should not have an effect on effective tax rates.

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