Corporate Effective Tax Rates for Research and Policy

Abstract

How much companies pay in corporate income taxes is often better captured by effective tax rates (ETRs) rather than by statutory ones. Economists further distinguish between those modeled using the law—forward-looking ETRs—and those estimated from actual data on companies’ profits and taxes—backward-looking ETRs. In this article, I move beyond this distinction, and I break down backward-looking ETRs according to the type of data used to estimate them. I focus on backward-looking ETRs that are estimated using companies’ balance sheet databases. Based on my review of recent findings, I argue that backward-looking ETRs—of multinational corporations in particular—have become more frequently estimated thanks to advances in data availability while also becoming more relevant as a result of ongoing global corporate tax reform debates.