Theoretical and practical aspects of the assessment of corporate income tax burden in EU

Paper will address the characterization and assessment of instruments used to measure the tax burden on corporate income, whose knowledge is important both for business entities, which are intending to develop their business not only at home country but also abroad, as well as for the state administration, to be able to determine their position in tax competition between states, as it significantly affects the volume of incoming and outgoing foreign direct investment. An objective comparison of the tax burden on businesses in different countries according to the statutory corporate income tax rate is also significantly reduced due to different rules for determining the tax base from corporate income, resulting from tax legislation valid in those states.

Paper will deal with a more detailed characteristics of the tools, that allow objectively determine the tax burden on corporate income, and their comparison between states. These tools, known as the effective corporate tax rates, which are the product of statutory corporate tax rates and rules for calculating the tax base, from a methodological point of view can be divided into three groups. The methods used in their construction can be described as a macro backward looking, micro backward looking and micro forward looking methods.

The paper will include an analysis of the structure of these instruments in each of these methodological groups, comparison of their specific characteristics and their suitability for use in relation to the statutory corporate tax rates and also trend analysis of effective corporate income tax burden in the EU countries in the period 1995 - 2011, using the effective corporate tax rates defined using the macro backward looking method. The tightness of the relationship between the values of the effective corporate tax rates and the values of the statutory corporate tax rates in EU Member States between 1995 and 2011, as an between random variables, will be tested using the correlation calculation.

Comparison of effective tax rates between countries offers then the opportunity to determine, whether there exist substantially different tax treatment of companies, that have the same characteristics, but are located in different states. Differences between the effective tax rates on corporate income in individual EU Member States more objectively demonstrate the potential tax competition between them, than differences between the statutory corporate tax rates.