DYNAMICS OF IMPLICIT TAXES AND COMPANY LIFE CYCLE: A QUANTITATIVE ANALYSIS OF CORPORATIONS LISTED ON B3
Name: RAIMUNDO DA SILVA
Publication date: 26/03/2024
Examining board:
Name |
Role |
|---|---|
| ALFREDO SARLO NETO | Advisor |
Summary: In national and international accounting-tax literature, most research focuses on obtaining
evidence related to explicit taxes, with research on implicit taxes being little disseminated.
Implicit taxes are conceptualized as lower pre-tax rates of return on investments that used
tax incentives. Implicit tax theory further predicts that after-tax rates of return will be the
same for all firms, in a perfectly competitive market. However, theory has already
demonstrated that there are different levels of implicit taxes, given the existence of
markets that are not perfectly competitive. On the other hand, the literature on the life
cycle of companies has obtained evidence that profitability is maximized in the mature
phase of the life cycle stages, with above-normal profits being generated, which makes
competition from other companies more intense. By carrying out quantitative research on
Brazilian companies listed on Brasil Bolsa Balcão - [B]3, and based on the interaction
between the theory of implicit taxes and the theory of the company life cycle, this thesis
sought to obtain evidence that Companies that are in the accounting-financial cycles of
introduction, growth, shakeout and decline bear a lower implicit tax burden than
companies that are in the accounting-financial cycle of maturity. This thesis also sought
to obtain evidence whether companies are able to retain the benefits obtained from the
use of tax incentives, given the lower implicit tax burden. In addition to Ordinary Least
Squares (OLS), tests were also carried out using Quantile Regression (RQ), to obtain
evidence whether the relationship between the various characteristics of the stages of the
accounting-financial cycle and the effective tax rate varies with the throughout the
distribution and to verify the existence of various levels of implicit taxes. The results
obtained corroborated the proposed hypotheses, as well as being in line with the life cycle
theory and the implicit tax theory. Thus, the results provided evidence that companies
located in the accounting-financial cycles of introduction, growth, shakeout and decline
have a lower implicit tax burden than companies in the mature accounting-financial cycle.
Still in line with previous studies on implicit taxes, it was also found that companies in
the accounting-financial cycles of introduction, growth, shakeout and decline are able to
retain (pass on to shareholders) the tax benefits obtained by reducing their tax rates
explicit, that is, implicit taxes do not completely eliminate the benefits obtained from the
use of tax incentives. Likewise, the existence of several levels of implicit taxes can be
seen, which is in line with previous studies, since the general framework of research on
implicit taxes supports that the more a market diverges from being perfectly competitive,
the lower the proportion of implicit taxes.
