Company average effective tax rates : a conceptual framework within the New Zealand experience. (1993)
AuthorsSawyer, Adrian Johnshow all
The impact of effective tax rates on tax policy formation has intensified since the major developments of the mid 1980s in the United States. In New Zealand the level of attention has been appreciably lower. This study critically reviews the effective tax rate literature from the United States, Canada, United Kingdom and Australasia, with the objective to isolate the essential findings of the research and to develop issues for consideration in New Zealand. A conceptual framework is developed for the measurement of average effective tax rates (AETRs) in New Zealand, incorporating an empirical and triangulation approach. The focus is to measure the AETR for listed public companies from 1984 to 1991, utilising three AETR ratios. The resulting AETRs are examined by way of individual companies, industry and sharemarket capitalisation groupings, with critical findings presented in both graphical and tabular form. Non-parametric statistics were utilised to test the research hypotheses, including sample representativeness and the significance of the ratio measure adopted. The results suggest that through incorporating a multiple period and triangulation research approach, AETRs, on average over time, are not dependent upon the particular research measure employed. However, the results for the industry and capitalisation manipulations of the data were mixed. The conceptual framework also includes the results of a mail questionnaire survey of expected AETR users and advisers. Parametric testing of the responses was employed to test the research hypotheses, as well as to identify the presence of any non-response bias. The testing provided mixed results, with evidence of response bias present in the results. Selected policy issues are discussed, with suggested reforms for the current ETR measurement and disclosure requirements offered for interested parties in New Zealand.
The research findings are compared to previous New Zealand research and to the United States literature. Suggestions for future research are offered.