A study on the Relation Between Implicit Taxes and Firm Market Structure in Taiwan

• Main Authors: Wen-Yang Liao, 廖文揚
• Other Authors: Su-Ming Lin
• Format: Others
• Language: zh-TW
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/vz6c4u

碩士 === 國立臺灣大學 === 會計學研究所 === 92 === In the absence of market frictions, differential tax treatments give rise to differences in pre-tax returns across investments, defined as the implicit tax by Scholes and Wolfson (1992). Market structures that are other than perfectly competitive can impede the realization of implicit taxes by allowing firms to earn extra-normal returns. This study estimates the implicit tax burden in Taiwan and investigates the relation between a firm’s implicit tax burden and two factors: (1) the pre-tax rate of return and (2) the potential market power of the firm, which could provide the opportunity to shift implicit tax burden from the firm to consumers orlabors. Using ordinary least square and monotonic regression models to analyze the firm-level data from 1996-2002, the empirical results indicate that implicit taxes are positively related to the pre-tax rate of return and firm market structure characteristics. However, the empirical results are not consistent with the predictions of the implicit tax hypothesis. Itsuggests there are significant differences between firms’ tax environments in Taiwan and in the United States . Firms in Taiwan may earn significant extra-normal returns and enjoy preferential tax treatments as well.