Taxing Book Profits: New Proposals and 40 Years of Critiques

2020 ◽  
Vol 73 (4) ◽  
pp. 1025-1046
Author(s):  
Mindy Herzfeld
Keyword(s):  
Financial Statement ◽  
Taxable Income ◽  
Corporate Profits

This paper considers recent domestic and international proposals to use financial statement earnings as the basis for imposing additional or minimum taxes on corporate income and to reallocate corporate profits among jurisdictions. It reviews prior research undertaken in the context of previous proposals to partially substitute financial accounts for taxable income and considers how valid critiques of prior proposals are with respect to current initiatives. It concludes by noting that the concerns raised about earlier proposals have neither been fully considered nor addressed in the recent initiatives.

Incorporating Financial Statement Information to Improve Forecasts of Corporate Taxable Income

2020 ◽  
Author(s):  
Danielle Green ◽  
Erin Henry ◽  
Sarah Parsons ◽  
George A. Plesko
Keyword(s):  
Financial Statement ◽  
Taxable Income

The Tax Elasticity of Financial Statement Income: Implications for Current Reform Proposals

2020 ◽  
Vol 73 (4) ◽  
pp. 1047-1064
Author(s):  
Dhammika Dharmapala
Keyword(s):  
Conceptual Framework ◽  
Welfare Analysis ◽  
Financial Statement ◽  
Deadweight Loss ◽  
Corporate Tax ◽  
Taxable Income ◽  
Relevant Evidence ◽  
Elasticity Of Taxable Income ◽  
Current Reform

Current reform proposals in international and corporate tax (most notably the Organisation for Economic Co-operation and Development’s Global Anti-Base Erosion proposal) envisage taxing financial statement income. This paper develops a conceptual framework, based on the literature on the elasticity of taxable income (ETI), for the welfare analysis of such proposals and discusses the available evidence on the tax elasticity of financial statement income. The central conclusion is that the most relevant evidence suggests a large responsiveness of financial statement income to taxes (and, hence, albeit with significant limitations and caveats, arguably a large deadweight loss). The paper also highlights the need for more evidence on this question.

A Case Integrating Financial and Tax Accounting Using the Balance Sheet Approach to Account for Income Taxes

2017 ◽  
Vol 32 (4) ◽  
pp. 41-49 ◽  
Author(s):  
Melissa P. Larson ◽  
Troy K. Lewis ◽  
Brian C. Spilker
Keyword(s):  
Income Tax ◽  
Balance Sheet ◽  
Financial Statements ◽  
Income Taxes ◽  
Financial Accounting ◽  
Financial Statement ◽  
Publicly Traded ◽  
Taxable Income ◽  
Accounting For Income Taxes ◽  
Advanced Version

ABSTRACT This case guides students through the process of reconciling financial (book) income to its taxable income, calculating the tax provision, preparing the income tax footnote disclosure, and completing Form 1120, Schedule M-1 for a fictitious publicly traded client. In the case, students are presented with the company's financial statements, including supporting schedules, and a tax basis balance sheet. Students are asked to calculate the tax provision and construct the income tax footnote as a pre-class assignment. In class, students debrief the tax provision calculation and income tax footnote and use information contained in the income tax footnote to reconcile the company's book to taxable income. Students completing this case should be able to (1) interpret the differences between a book basis balance sheet and a tax basis balance sheet, (2) create the income tax footnote disclosure using the ASC 740 balance sheet approach to accounting for income taxes, and (3) use information in the financial statement footnote and related disclosures to determine a company's book-tax differences and reconcile its book to taxable income. This case is designed for an intermediate financial accounting or tax course but an advanced version of the case could be used in a graduate financial accounting or graduate tax course.

scholarly journals The Degradation of Reported Corporate Profits

2005 ◽  
Vol 19 (4) ◽  
pp. 171-192 ◽  
Author(s):  
Mihir A Desai
Keyword(s):  
Capital Markets ◽  
Tax Avoidance ◽  
Financial Statements ◽  
Financial Statement ◽  
Dual Nature ◽  
Corporate Scandals ◽  
High Profile ◽  
The Government ◽  
Tax Savings ◽  
Corporate Profits

Recent corporate scandals have highlighted abuses by firms overstating profits to capital markets. In a related but less noticed vein, the reporting of profits to tax authorities has come under increased scrutiny with heightened concerns over the spread of tax avoidance activities. How could firms simultaneously be inflating profits reported to the capital markets and understating profits reported to tax authorities? The practical answer is that American firms keep two sets of financial statements: a financial statement that reports “book profits” to the capital markets and a separate financial statement that reports “tax profits” to the government. These two profit reports can bear little resemblance to each other and follow distinct rules. This paper argues that the latitude afforded managers by the dual nature of corporate profit reporting has contributed to the simultaneous degradation of profit reporting to capital markets and tax authorities. The distinction between book and tax profits allows managers the ability to mischaracterize tax savings to capital markets and to mischaracterize profits to tax authorities. Examination of three high-profile cases of managerial misreporting of profits and tax avoidance—at Enron, Tyco and Xerox—reveals how the drive to improve reported book profits fosters tax avoidance and how the drive to limit taxes gives rise to the manipulation of accounting profits and managerial malfeasance.

scholarly journals Pengaruh Kinerja Keuangan Terhadap Harga Saham PT. Krakatau Steel Tahun 2015-2019

2020 ◽  
Vol 4 (1) ◽  
pp. 69
Author(s):  
Meyda Dewi Trisbiani ◽  
Amanatur Rizqiyah ◽  
Amira Dian Novita
Keyword(s):  
Linear Regression ◽  
Financial Performance ◽  
Stock Prices ◽  
Annual Report ◽  
Steel Production ◽  
Financial Statement ◽  
Return On Equity ◽  
Regression Test ◽  
Equity Ratio ◽  
Corporate Profits

PT. Krakatau Steel which is engaged in steel production has experienced a decline in financial performance. From this incident, the company has a large amount of debt and declining corporate profits. This study aims to determine the effect of Return on equity, and Debt to equity ratio on stock prices on the IDX. The population and sample in this study are the financial statement data of PT. Krakatau Steel 2015-2019. The data collected in this study uses how to download the company's Annual Report that we obtained from the official website of IDX. Analysis of the data used in this study uses the classic assumption test, multiple linear regression test, and hypothesis testing with the SPSS application program. The results of this study are the Return on equity variable, and the Debt to equity ratio has no significant effect on stock prices.

scholarly journals What Turns the Taxman on? Tax Aggressiveness, Financial Statement Audits, and Tax Return Adjustments in Small Private Companies

2020 ◽  
Vol 55 (03) ◽  
pp. 2050011
Author(s):  
Hannu Ojala ◽  
Juha Kinnunen ◽  
Lasse Niemi ◽  
Pontus Troberg ◽  
Jill Collis
Keyword(s):  
Financial Statements ◽  
Financial Statement ◽  
Fiscal Year ◽  
Tax Administration ◽  
Data Set ◽  
Private Companies ◽  
Tax Aggressiveness ◽  
Taxable Income ◽  
Tax Returns ◽  
Empirical Tests

This study examines the effect of tax aggressiveness and voluntary audit of financial statements on the likelihood of tax adjustments in small private companies. We provide evidence that (a) tax aggressiveness increases the likelihood of the tax authority not accepting taxable income as reported, whereas (b) voluntary audit decreases it. To derive our hypotheses, we built a theoretical stochastic model explaining tax authority’s reactions to bias and noise in tax returns and how these two relate to tax aggressiveness and voluntary audit. In our empirical tests of the hypotheses, we used a large proprietary data set comprising internal records of the Finnish Tax Administration for the fiscal year 2010 combined with data on the taxable income reported by approximately 19,500 small, private companies. Our results show that while the findings on tax aggressiveness are significant when measured with the book-tax difference using proprietary tax return data from the Tax Administration, they are insignificant when based on the conventional tax aggressiveness measure of book-tax difference derived from publicly available financial statement data. Our paper contributes to the literature by being the first to document the effects of tax aggressiveness and voluntary audit on tax return adjustments of small private companies.

Pengaruh Faktor Demografi Dan Iklim Organisasi Terhadap Niat Whistleblowing Internal

2017 ◽  
Vol 4 (1) ◽  
pp. 12-22
Author(s):  
Priyastiwi Priyastiwi
Keyword(s):  
Data Analysis ◽  
Data Collection ◽  
Organizational Climate ◽  
Demographic Factors ◽  
Financial Statement ◽  
Research Use ◽  
Analysis Method ◽  
Financial Statement Fraud ◽  
Internal Whistleblowing ◽  
Collection Methods

This study aimed to examine the effect of demographic factors and organizational climate on the intention of internal whistleblowing. The sample was an accountant who had worked as an auditor. Data collection methods using questionnaires with financial statement fraud case scenarios. This research use ANOVA data analysis method to examine demographic factors include age, gender, and experience, as well as organizational climate on the intention of internal whistleblowing. The results showed only the experience of demographic factors that influence internal whistleblowing. Besides internal whistlelowing also influenced by organizational climate in the company.Keyword: Demographics, Organizational Climate, Whistleblowing

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