Impact of Tax Effects on Profit Optimisation. Review of International Approaches

Abstract

Research background: Deteriorating economic conditions and the risk of an impending crisis underline the need for significant profit optimization, especially in the area of taxation. Purpose of the article: The aim of this paper is to analyse and evaluate the conditions for the creation of a tax shield in the V4 countries on a theoretical level and to confront these findings with the value of the total tax shield in the countries in question. Methods: This study uses the method of two-way analysis of variance with interaction, while also testing the assumptions of the model by normality tests, homogeneity test and post hoc tests (Scheffé and Tukey methods). Findings & Value added: A review of the sources of the tax shield shows that the tax systems in all the countries examined offer similar conditions for the application of tax shields. In a sample of more than 90000 companies, it was found that the level of the total tax shield given as the effective tax rate is similar in all countries examined (except Hungary). The branch of affiliation plays a role only in the environment of Hungarian companies, on the contrary, Slovak companies show homogeneity of the reported effective tax rate. Country and industry affiliation does not have sufficient explanatory power to predict the total tax shield. Conversely, other indicators of financial performance (operating profit) may be suitable indicators of the effective tax rate.