ISSN: 2222-6990
Open access
The effective tax rate (ETR) has become a focal point for businesses as it reflects the actual taxes paid based on earnings. This study examines the ETR of 42 Malaysian public companies in the plantation sector listed on Bursa Malaysia, providing insights into how tax rates vary across different industries and factors contributing to these differences. The findings can be useful for the policymakers in determining the effectiveness of current tax policy and its intended goal. The study used the ordinary least squares (OLS) method to analyse ETR date from 2012-2021 and to identify factors influencing ETR. Diagnostic tests confirmed linear relationships and addressed non-normal data distribution with transformations. Despite some irregular variance, OLS remained effective for classification and hypothesis testing. The data reveal an average ETR of 22.2%, below the corporate tax rate of 24.5%. Factors influencing ETR include company size, return on assets (ROA), company leverage, capital intensity, and inventory intensity. Prior studies suggest that corporate tax burdens vary widely, with larger companies occasionally paying lower ETR, although outcomes differ across sectors. OLS indicates a weak positive correlation between capital intensity and ETR, while ROA shows a negative correlation with company size, suggesting that larger companies may not effectively leverage profits. The R² statistic indicates that the independent variables explain only 2.8% of the variance in ETR, highlighting the complexity of tax liabilities influenced by broader economic conditions and regulatory changes. All independent variables exhibited a positive influence on the ETR, with capital intensity showing a significant influence. The study suggests further research on the factors influencing ETR to support the plantation sector and what extend it is going to impact ETR can be suggested for further research.
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