EFFECTIVE CORPORATE INCOME TAX RATE IN ROMANIA: A MICRO-BACKWARD LOOKING APPROACH

Abstract

Within the framework of micro-backward looking methodology, the paper computes the effective corporate income tax rate for Bucharest Stock Exchange non-financial companies for 2000 - 2009 period, using data from companies financial reports. We find that effective tax rate computed as profit tax/pre-tax income ratio was below the statutory tax rate, throughout the period, except for the year 2009 (when an alternative minimum tax was introduced) and the differences have diminished since the flat tax was adopted (2005). When applying a correlation analysis, we find that the difference between this effective tax rate and the statutory tax rate presents a strong negative correlation with the return on assets ratio (ROA). Also, we have find that commerce is enjoying the most favourable tax regime, while energy is the most heavily taxed.

Keywords

• effective corporate income tax rate, backward looking methodology