Impact of the state’s shareholding on the effective income tax rate

Abstract

The purpose of the article is to answer the question of whether the state’s ownership of companies has an impact on the current effective corporate income tax burden. The article tests the hypothesis that the effective income tax rate (ETR) for state-owned companies is higher than for other companies. The study of the relationship between the effective income tax rate and the state’s ownership is carried out employing linear regression, and the parameters of the econometric models are estimated using the classical least squares method. The analysis covers 151 companies listed on the Warsaw Stock Exchange, representing nine sectors over the period 2004–2021. The analysis of the cross-sectional data for the subsequent years shows that the ETR is significantly affected by the state’s ownership only in certain periods and the interdependencies are either positive or negative. A positive correlation appears in 2007, 2013 and 2017, while a negative occurs in 2008 and 2020. In the latter two years, the economic prosperity index fell the fastest, in the first case because of the financial crisis, in the second because of the COVID-19 pandemic. In the other years indicated, when economic prosperity was good, state-owned companies showed a higher effective income tax rate, which was in the interest of the main owner. The observations lead us to consider the extent of state authority in the sphere of dominium and respect for the rights of minority shareholders.