On behalf of the European Commission, ZEW computes measures of corporate effective taxation in Europe based on the Devereux-Griffith (DG) methodology on a yearly basis. For the computation of the effective tax rates, a common inflation rate and a common interest rate are used. This assumption is useful because it allows a meaningful comparison across countries of the effects of tax parameters on effective taxation.
However, in some cases the assumption could hide the effects of specific tax provisions in some countries. Moreover, it may hide the effects of the inflation rate on effective taxation if inflation differentials across countries are large. Therefore, the study at hand analyses the effects of the interest and inflation rate on the effective tax rate using country specific economic values of these variables and exploring the effects when changing the common values used in the computations.