Miscellaneous 2013

How close are taxable income and accounting profit? An empirical study of large Australian companies

Source: Australian Tax Forum Journal Article

Published Date: 1 Sep 2013

 

There has been a perception by the Australian public that ‘big’ Australian businesses do not pay their ‘fair’ share of income tax. This perception is primarily based on the belief that there exists a vast array of tax concessions available to companies in Australia. The present article examines the gap between taxable income and accounting profit of large Australian companies. This is achieved by estimating the effective tax rates (ETRs), defined as the ratio of income tax expense over accounting profit before tax, of 20 large (and highly visible) corporations in Australia for the six-year period from 2005 to 2010. Three measures of ETR, namely ETR, current and cash ETR are considered in this article. It is shown that while annual ETRs tend to fluctuate from year to year around the statutory tax rate, the aggregate ETRs of most companies are very close to the statutory tax rate. Thus, taxable income and accounting profit are very close for large Australian companies. These empirical findings are consistent with the Australian Government’s income tax base broadening policy which has, over the past 25 years, removed most tax concessions to companies.

Sorry, this is subscriber only content.

To gain access to this material and much more - Subscribe Now.

(Note: Members can access Taxation in Australia journal articles without a Tax Knowledge Exchange subscription - please log in to access).

Already a Subscriber? Login now

Already a Subscriber? Login now

Details

The material is copyright. Apart any fair dealing for the purpose of private study, research criticism or review, as permitted under the copyright Act, no part may be reproduced by any process without written permission from The Tax Institute.

Unless expressly stated, opinions are not that of The Tax Institute, which accepts no responsibility for the accuracy of any of the information contained within it.

The Tax Institute
(ABN 45 008 392 372 (PRV14016))

("TTI")

The Tax Institute is a Recognised Tax Agent Association (RTAA) under the Tax Agent Services Regulations 2009. 

Copyright Statement

All materials provided on this site are protected by copyright and are owned by or licensed to TTI.

Except as expressly permitted by TTI or the copyright owner, any person or company who uses this site must not use, reproduce, redistribute, retransmit, publish or otherwise transfer, or commercially exploit, the materials or any information, software or other content, in whole or in part, which is available through this site.

Tags

Miscellaneous 2013

Share this page