The Computation and Comparison of the Effective Tax Burden in Four Asian Countries

Christoph Spengel, Wei Li, Benedikt Zinn, Katharina Finke
The Asia-Pacific region has gained economic power among the world's economies and offers enormous sales opportunities for multinational companies. When considering foreign Hitotsubashi Journal of Economics 52 (2011), pp.13-39. Ⓒ Hitotsubashi University * The authors would like to sincerely thank PricewaterhouseCoopers AG, Frankfurt, Germany for providing valuable information concerning the tax regulations in the considered countries. This paper is supported by the "Foundation of Shanghai
more » ... of Shanghai University of Finance and Economics for Fostering Excellent Doctoral Dissertations". Here to express sincere thanks. ** Corresponding Author direct investment in countries from this region, the specific taxation framework constitutes one determinant to be accounted for. The paper provides a comparative analysis of the corporate tax regimes in four important Asian countries, namely China, India, Japan and Singapore. It is not limited to a comprehensive description of the tax systems, but goes to a detailed analysis of the effective average tax burden, which is relevant for investors' decisions on location, scale and mode of finance of a potential investment. The calculation is based on the European Tax Analyzer. This approach allows capturing different types of taxes borne by corporations, the respective tax bases and tax rates in great detail and hence extends the literature on company taxation in Asia. In addition, we seek to contribute to literate not only by establishing a country ranking based on the overall tax burden, but also by identifying the underlying tax drivers. In doing so, sensitivity analyses are run to examine the effects of altering model assumptions, thereby illustrating the sensitivity of the base case results to selected financial ratios. As corporate income taxes might affect investments in various industry sectors differently, the comparison of the effective average tax burdens is finally extended to corporations representing different industries.
doi:10.15057/19219 fatcat:dqcidp5ksnfwbmfh5hfuccyjvi