Turnover-based corporate income taxation and corporate risk-taking
Fernando Siahaan,
Harald Amberger and
Caren Sureth
No 281, arqus Discussion Papers in Quantitative Tax Research from arqus - Arbeitskreis Quantitative Steuerlehre
Abstract:
This study investigates the effect of a Turnover-based Corporate Income Tax (TbCIT) on corporate risk-taking. TbCIT is a simplified presumptive tax levied on a firm's turnover and commonly applied to SMEs and hard-to-tax income. Using a rich sample of Indonesian firms for the years 2009 to 2021, we provide evidence that corporate risk-taking is negatively associated with a firm's TbCIT exposure. The negative effect is stronger for firms in industries with high profit margins and firms with prior year losses. However, we find no association between risk-taking and the effective TbCIT rate. Overall, our findings extend prior research on the effects of limited risk sharing between taxpayers and the government by showing that turnover-based taxation can depress corporate risk-taking. Our study also informs policymakers about potential unintended consequences of adopting simplified, turnover-based tax regimes.
Keywords: turnover-based tax; corporate income tax; risk-taking; SMEs taxation (search for similar items in EconPapers)
JEL-codes: G32 H25 H32 O53 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-acc, nep-cfn, nep-pbe, nep-rmg and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:arqudp:285364
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