Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/285364 
Year of Publication: 
2023
Series/Report no.: 
arqus Discussion Paper No. 281
Publisher: 
Arbeitskreis Quantitative Steuerlehre (arqus), Berlin
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.
Subjects: 
turnover-based tax
corporate income tax
risk-taking
SMEs taxation
JEL: 
H25
H32
G32
O53
Document Type: 
Working Paper

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