Abstract

This paper studies the cross-sectional variability of corporate effective tax rates on Italian corporations. In particular, using a dataset containing more than 114.000 tax declarations referring to year 2000 the paper focuses upon the "tax base" and the "tax rate" determinants of effective taxation. On average these determinants raised the rate of effective taxation on Italian corporations by approximately 3,5% and their intrinsic variability was the highest among the components of the effective taxation rate. The econometric investigation shows that these determinants increased the effective tax rate on smaller corporations while they decreased it for larger ones. This may appear unjustifiable if one believes that Italian SME's contribute more than large corporations to economic growth and job creation. However, the elimination of the "tax base" determinants (deductions and allowances, differential treatment of financial unearned increments and so on) would increase the value of the share of taxes paid by few Italian large corporations and might therefore put the stability of revenues at risk.