Market concentration and implicit taxes: analyzing Brazilian firms

• Published in: RAUSP management journal 2024-11, Vol.59 (4), p.402-417
• Main Authors: Lopo Martinez, Antonio, da Silva, Raimundo, Sarlo Neto, Alfredo
• Format: Article
• Language: English
• Subjects: Competition; Corporate strategy; Explicit tax; Implicit tax; Market concentration; Monopolies; Regression analysis; Tax incentives; Tax rates; Tax reform
• ISSN: 2531-0488; 2531-0488
• DOI: 10.1108/RAUSP-04-2023-0055

Purpose This study aims to explore the interplay between market concentration and implicit tax burdens in Brazil, offering a fresh perspective on the conventional belief of perfect competition. Design/methodology/approach Data was sourced from Brazilian firms on the B3 stock exchange between 2011 and 2021. Multiple linear regression techniques were employed to analyze the relation of explicit tax rates to firms’ pre- and post-tax returns. Findings Dominant firms in the market tend to bear a lower implicit tax burden and have the capacity to extend tax incentive benefits to shareholders. Research limitations/implications The findings highlight Brazil’s intricate corporate tax fabric, particularly regarding implicit taxes. They provide a foundation for deeper inquiries into how market dominance, taxation policies, and corporate strategies converge. Practical implications Regulators and business leaders can harness this knowledge to recalibrate tax strategies and market regulations. Specifically, a closer examination of the dynamics that permit reduced implicit tax implications in monopolized markets is essential for equity. Social implications Companies with pronounced market concentration can mitigate their implicit tax burdens, potentially offloading them to consumers and suppliers. This points to potential inequities in current tax structures. Originality/value This research unveils nuanced insights into Brazil’s multifaceted interrelations between corporate influence, taxation strategies, and market forces.