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Regular version of the site

Article

TAXATION REGULATION OF THE BRICS’ INNOVATIVE COMPANIES

BRICS Law Journal. 2019. Vol. IV. No. 1. P. 41-62.
Makeeva E. Y., Mikhaleva I.

The question as to whether tax rate influences capital structure remains unresolved,
though the amount of research conducted on the issue grows every year. This question
is particularly important for innovative companies for two reasons. First, R&D spending
and the level of innovativeness among firms are crucial indicators of a country’s overall
economic performance. The second reason is that tax incentive programs today are applied
by governments with increasing frequency. There is a strong lack of tax rate influence on the
capital structure of innovative companies and tax incentive programs impact on the debtto-
equity ratio particularly. This research is intended to help fill this gap. The question as to
the influence of tax rate as well as influence of R&D taxation programs on capital structure
will be studied via the econometrics approach – that is, through panel regressions. The time
frame to be considered is from 2012 until 2015. Four hypotheses connected with taxation
influence on capital structure in BRIC countries were investigated. These hypotheses differ
according to which indicator of the structure of capital is taken as the basis of the analysis.
This investigation may be useful for governments or other analysts to estimate ETR influence
on capital structure choice and assist in making a decision between increasing the tax rate
(and thereby collect more taxes) versus stimulating companies to take on less debt and less
risks. The results highlighted in this paper show an absence of significant impact vis-à-vis
the tax rate on the capital structure and also indicate an absence of a significant impact
of tax incentive programs on capital structure.