Analysis of loss-making corporations using corporate tax returns

Takero Doi, Shun-ichiro Bessho and Katsuki Mori
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Takero Doi: Visiting Professor, National Tax College, Professor, Keio University
Shun-ichiro Bessho: Visiting Professor, National Tax College, Professor, Waseda University
Katsuki Mori: National Tax College

Public Policy Review, 2026, vol. 22, issue 1, 1-79

Abstract: This paper reports the results of the analysis using the universe of the corporate tax return to show distributions of income or loss amounts and corporate income tax amounts by attributes such as capital amount, industry and family or non-family classification, and to analyze the distribution of tax loss carryforwards and other measures. Our data come from the tax returns during FY2014 to 2020. We construct panel data set considering mergers, multiple filing in a single year and missing information. The results using our full sample, excluding consolidated corporations, foreign corporations and corporations that are closed or in liquidation, are as follows. The distribution of income or loss amounts, which are not published in the Corporation Sample Survey, suggests that noticeable bunching at the point where income is exactly 0 yen. Corporations resulting in zero loss amounts are more prevalent among corporations with capital of 100 million yen or less and less prevalent among corporations with capital of over 100 million yen. Corporations that became loss-making corporations for seven consecutive years account for approximately 36.5% of all corporations, with the proportion increasing with smaller capital. Only 1.1% of all corporations apply a loss carryforward deduction for seven consecutive years, while 21.2% of all corporations do not apply a loss carryforward deduction at all in seven consecutive years. We examine the transition between fiscal years for corporations with capital of over 100 million yen and those with capital of less than 100 million yen. The transition probability for corporations with capital of over 100 million yen that reduce their capital to 100 million yen or less in the next fiscal year ranges from just under 4% to just over 5%. On the other hand, the transition probability for corporations with capital of 100 million yen or less that increase their capital to more than 100 million yen in the next fiscal year is extremely low. Loss-making corporations have a higher probability of reducing their capital to 100 million yen or less in the next fiscal year than profit-making corporations. We clarify the number of corporations by corporate tax amount bracket to show that corporations paying over 5 million yen in corporate tax, whose share is approximately 5%, account for approximately 95% of all corporate tax. We also find that the larger the capital size of a corporation, the higher the proportion of corporations paying over 5 million yen.

Keywords: corporate tax; corporate tax return; tax records; loss-making corporations; capital reduction (search for similar items in EconPapers)
JEL-codes: H25 H32 M41 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:mof:journl:ppr22_01_04

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