An Investigation on the Relationship Between Firm Size and Effective Tax Rates in Taiwan

• Main Authors: Li-Chueh Su, 蘇麗雀
• Other Authors: none
• Format: Others
• Language: zh-TW
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/56084825613628390587

碩士 === 逢甲大學 === 會計與財稅所 === 92 === U.S. studies have found a positive relation between firm size and effective tax rates indicating that large U.S. firms suffer a “political cost”. Firm size has been used as a proxy for the firm’s political costs and hence managers’ proclivity to choose income reducing accounting procedures. This paper examines the connection between firm size and effective tax rates, confirms the political cost hypothesis whether is applicable in Taiwan. To examine the difference between ETR of large firms and small firms, a preliminary analysis is first conducted using traditional methodology. In addition to using the traditional methodology, a multiple variable regression is also employed which includes firm size with other explanatory variables and effective tax rates as the dependent variable. This study suggests that there is evidence against the positive relation put forth by the political cost hypothesis. We find a negative relation between firm size and effective tax rates, which is in stark contrast to the majority of U.S. findings such as Zimmerman (1983). Furthermore, the political cost hypothesis is not applicable in Taiwan. The result may indicate that large firms are able to use their economic power to influence legislation or obtain favorable tax treatments, or because the government requires the cooperation of large firms to achieve national economic goals. The nature of relationships between governments and corporations is known to be different in Taiwan (industrializing county) and in the United States. The empirical results also find research and development expense intensity；profitability; debt; capital intensity; long-term equity investment; capital gain; growth are potentially relevant factors on explain effective tax rates. Keywords: Firm size; Effective tax rate; Political cost