DETERMINANTS OF EFFECTIVE TAX RATE

Taxes are wide spread phenomenon which affects every aspect of life. Almost every person (regardless of their legal designation - natural or legal) has to pay different types of taxes depending on activity that is involved in. In world of business, taxes and how companies handle them is one of the crucial factors of their success. It is important to apply knowledge about taxation so that company can pay optimal amount of taxes or in other words, minimal amount of taxes in certain situation. In this paper, focus will be directed at corporate income tax which companies have to pay if they report profits for the current year in their financial statements. Corporate income tax is one of the traditional tax revenues of the state and for companies is perhaps the biggest direct tax liability. Amount of corporate taxes paid can also be reduced (or even increased) by indirect effect through reported income because accounting standards are relatively flexible and they establish a framework within which companies can operate and choose their accounting policy. The aim of this paper is to statistically analyse determinants of effective tax rates (ETR) for corporate tax because corporate taxes are paid at same rate but ETR can differ significantly due to tax exemptions prescribed by tax laws. Sample was formed using companies listed on stock exchanges.