The Tax Complexity Index – A Survey-Based Country Measure of Tax Code and Framework Complexity

84 Pages Posted: 16 Sep 2020 Last revised: 6 Jul 2021

See all articles by Thomas Hoppe

Thomas Hoppe

Paderborn University

Deborah Schanz

Ludwig Maximilian University of Munich - Faculty of Business Administration (Munich School of Management)

Susann Sturm

Ludwig Maximilian University of Munich - Faculty of Business Administration (Munich School of Management)

Caren Sureth-Sloane

Paderborn University; Vienna University of Economics and Business; TRR 266 Accounting for Transparency

Date Written: July 1, 2021

Abstract

This paper introduces the Tax Complexity Index (TCI). The TCI comprehensively measures the complexity of countries’ corporate income tax systems faced by multinational corporations. It builds on surveys of highly experienced tax consultants of the largest international tax services networks. The TCI is composed of a tax code subindex covering tax regulations and a tax framework subindex covering tax processes and features. For a sample of 100 countries, we find that tax complexity varies considerably across countries, and tax code and framework complexity also vary within countries. Among others, tax complexity is strongly driven by the complexity of transfer pricing regulations in the tax code and tax audits in the tax framework. When analyzing the associations with other country characteristics, we identify different patterns. For example, we find a positive association of GDP with tax code complexity and a negative association with tax framework complexity, suggesting that highly economically developed countries tend to have more complex tax codes and less complex frameworks. Overall, the tax complexity measures can serve as valuable proxies in future research and supportive tools for a variety of firm decisions and national and international tax policy discussions.

Keywords: business taxation, cross-country survey, multinational corporations, tax complexity, tax complexity index, tax consultants

JEL Classification: H20, H25, C83, O57

Suggested Citation

Hoppe, Thomas and Schanz, Deborah and Sturm, Susann and Sureth-Sloane, Caren, The Tax Complexity Index – A Survey-Based Country Measure of Tax Code and Framework Complexity (July 1, 2021). TRR 266 Accounting for Transparency Working Paper Series No. 5, WU International Taxation Research Paper Series No. 2019-06, Available at SSRN: https://ssrn.com/abstract=3469663 or http://dx.doi.org/10.2139/ssrn.3469663

Thomas Hoppe

Paderborn University ( email )

Warburger Str. 100
Paderborn, 33098
Germany

Deborah Schanz

Ludwig Maximilian University of Munich - Faculty of Business Administration (Munich School of Management) ( email )

Ludwigstr. 28 RG IV
Munich, Bavaria 80539
Germany
+49 (0) 89 / 2180 - 3681 (Phone)
+49 (0) 89 / 2180 - 3874 (Fax)

HOME PAGE: http://www.en.steuern.bwl.uni-muenchen.de/index.html

Susann Sturm

Ludwig Maximilian University of Munich - Faculty of Business Administration (Munich School of Management) ( email )

Ludwigstr. 28 RG
Munich, DE 80539
Germany

Caren Sureth-Sloane (Contact Author)

Paderborn University ( email )

Warburger Str. 100
Paderborn, 33098
Germany

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

TRR 266 Accounting for Transparency ( email )

Warburger Straße 100
Paderborn, 33098
Germany

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