Insights #17: The “Crux of Corporate Taxation”: Do more profitable firms pay more corporate taxes? What do negative cash effective tax rates reveal?
Concerns about corporate tax avoidance have become salient. Crux of Capitalism data reveals a clear positive relationship between a company's economic profitability and its net tax payments. While the percentage of firms with negative cash effective tax rates exhibit cyclical variation, there is an overarching upward trend. In the United States, the share of firms with negative cash ETR rose by 14 percentage points from 2005 to 2022. In China, 13% of listed firms received net tax refunds in 2022.