The Role of Auditors, Non-Auditors, and Internal Tax Departments in Corporate Tax Aggressiveness

2015 ◽  
Vol 91 (1) ◽  
pp. 179-205 ◽  
Author(s):  
Kenneth J. Klassen ◽  
Petro Lisowsky ◽  
Devan Mescall
Keyword(s):  
Tax Compliance ◽  
Tax Planning ◽  
Internal Revenue Service ◽  
Corporate Tax ◽  
Tax Aggressiveness ◽  
Big 4 ◽  
Confidential Data ◽  
Tax Preparer ◽  
Tax Returns

ABSTRACT Using confidential data from the Internal Revenue Service on who signs a corporation's tax return, we investigate whether the party primarily responsible for the tax compliance function of the firm—the auditor, an external non-auditor, or the internal tax department—is related to the corporation's tax aggressiveness. We report three key findings: (1) firms preparing their own tax returns or hiring a non-auditor claim more aggressive tax positions than firms using their auditor as the tax preparer; (2) auditor-provided tax services are related to tax aggressiveness even after considering tax preparer identity, which supports and extends prior research using tax fees as a proxy for tax planning; and (3) Big 4 tax preparers, in particular, are linked to less tax aggressiveness when they are the auditor than when they are not the auditor. Our findings help policymakers and researchers better understand an important feature of tax compliance intermediaries; particularly, how the dual role via audits is related to observable corporate tax outcomes.

Corporate Tax Privacy and Human Rights

2019 ◽  
pp. 279-302
Author(s):  
Joshua D. Blank
Keyword(s):  
Tax Compliance ◽  
The United States ◽  
Tax Planning ◽  
Public Access ◽  
Tax Law ◽  
Corporate Tax ◽  
The Public ◽  
Tax Returns ◽  
The Government ◽  
Relationship Of

This chapter examines the relationship of corporate tax privacy and tax compliance from a new vantage point, which is called the “intercorporate perspective.” In the United States, all tax returns and return information of corporations are confidential. An unappreciated value of corporate tax privacy is that it can limit the pressure to pursue aggressive tax planning and reporting that corporate tax directors often face from significant shareholders, nontax managers, and even themselves. Corporate tax privacy provides the government with valuable strategic defenses by restraining the ability of a corporation’s stakeholders and agents to engage in “benchmarking” and “reverse engineering,” behaviors that would likely cause some tax directors to pursue more aggressive tax planning and reporting. Yet, at the same time, increased public access to certain corporate tax return information could enable the public to participate in informed debate and discussion of the corporate tax law and to question whether the governments is applying the tax law to corporate taxpayers effectively and fairly.

scholarly journals Research on the Role of Tax Planning in Preventing Corporate Tax Risks

2020 ◽  
Vol 4 (4) ◽  
pp. 156
Author(s):  
Yuting Guo ◽  
Qiuping Ouyang ◽  
Min Peng
Keyword(s):  
Business Process ◽  
Tax Planning ◽  
Business Development ◽  
Tax Burden ◽  
Corporate Tax ◽  
Laws And Regulations

<p>Paying taxes according to laws and regulations in the process of business development is an obligation of companies. It is a vital task for companies to reduce tax burden by reasonably applying laws, regulations and policies, which requires tax planning. This article explores the relevant contents of corporate tax planning and tax risks. Firstly, it briefly expounds tax risks and tax planning, then analyzes the causes of tax risks. Finally, the measures are put forward to avoid tax risks in the business process affecting the development of companies.</p>

scholarly journals Covid-19 and corporate tax avoidance: Measuring long-run tax burdens as an alternative bailout test

2021 ◽  
Vol 4 (3) ◽  
pp. 216-244
Author(s):  
Subagio Efendi
Keyword(s):  
Financial Aid ◽  
Income Tax ◽  
Tax Avoidance ◽  
Tax Compliance ◽  
Total Sample ◽  
Ordinary Least Squares ◽  
Corporate Tax ◽  
Long Run ◽  
Tax Returns ◽  
Avoidance Measures

This study fills the gap in the tax authority’s Covid-19 financial aid verifications by examining, and nominating, Long-run ETR (Dyreng et al., 2008) as the better corporate tax avoidance measure in excluding tax evader firms from the broad stimulus programs. Analysing confidential tax returns of 4,752 largest firms (32,120 firm-years) in Indonesia over 2009 to 2017 periods, this study found 18.12 percent of total sample firms is able to retain its Long-run ETR below 10 percent, which indicates continual tax avoidance activities by these firms during observation periods. Moreover, applying univariate and multivariate Ordinary Least Squares and Panel Data estimations, this study reveals, relative to other tax avoidance measures, Lagged Cash ETR (Lisowsky, 2010; Lisowsky et al., 2013) present the most consistent reliability in predicting long-run income tax burdens. Thus, this study asserts, in the conditions of computing Long-run ETR is costly and impractical (i.e. because of data unavailability), tax authority and policymakers can directly analyse firms’ Lagged Cash ETR to gauge their long-run income tax burdens and tax compliance behaviours prior the economic downturn. 

Voluntary Disclosure Responses to Mandated Disclosure: Evidence from Australian Corporate Tax Transparency

2021 ◽  
Author(s):  
Allison Kays
Keyword(s):  
Voluntary Disclosure ◽  
Tax Planning ◽  
Public Disclosure ◽  
Corporate Tax ◽  
Public Firms ◽  
Additional Information ◽  
Proprietary Costs ◽  
Tax Returns ◽  
Disclosure Responses ◽  
Reputational Costs

In order to deter aggressive tax planning, the Australian government mandated public disclosure of three line items from large corporations' tax returns. However, there is no evidence that the mandated disclosure led public firms to pay more taxes (Hoopes, Robinson, and Slemrod 2018). Instead, I find that firms strategically offset expected reputational costs by voluntarily issuing supplemental information. Specifically, when managers expect new reputational costs from the mandated tax return disclosure (wherein the disclosure reveals an unexpectedly low tax liability) and low proprietary costs from a supplemental voluntary disclosure (wherein the firm discloses its nonaggressive tax planning), firms are likely to voluntarily disclose information that both preempts and supplements the government's mandatory disclosure. Thus, when mandatory disclosures are incomplete, firms will voluntarily issue additional information to remain in control of their disclosure environments.

How do IRS Resources Affect the Corporate Audit Process?

2019 ◽  
Vol 95 (2) ◽  
pp. 311-338 ◽  
Author(s):  
Michelle Nessa ◽  
Casey M Schwab ◽  
Bridget Stomberg ◽  
Erin M. Towery
Keyword(s):  
Internal Revenue Service ◽  
Strategic Game ◽  
Audit Process ◽  
Publicly Traded ◽  
Budget Cuts ◽  
Corporate Tax ◽  
Negatively Associated ◽  
Internal Revenue ◽  
Audit Data ◽  
Tax Returns

ABSTRACT This study investigates how Internal Revenue Service resources affect the IRS audit process for publicly traded corporations. Using confidential IRS audit data, we examine the effect of IRS resources on the incidence and magnitude of proposed deficiencies and settlement outcomes. We find that IRS resources are positively associated with both the likelihood and magnitude of proposed deficiencies, but negatively associated with the proportion of proposed deficiencies collected. These results are consistent with the IRS focusing on fewer positions, but targeting positions supported by weaker taxpayer facts when resources are more limited. Based on our findings, we estimate the loss in tax collections from audits of LB&I corporate tax returns alone exceeds the savings from reductions in the IRS enforcement budget. This study contributes to the literature examining the strategic game between tax authorities and corporate taxpayers and has important implications for policymakers, particularly in light of recent IRS budget cuts.

scholarly journals Strategic responses in corporate tax planning using opportunity areas

2021 ◽  
pp. 31-43
Author(s):  
Mykola Bondar ◽  
Oksana Portna ◽  
Natalia Iershova Iershova
Keyword(s):  
Positive Relationship ◽  
Planning Process ◽  
Tax Planning ◽  
Strategic Responses ◽  
Corporate Tax ◽  
Corporate Planning ◽  
Eu Member States ◽  
Tax Management ◽  
A Company

Using sampling for companies from EU member states and Ukraine, we find a significant and positive relationship between the company size and the amount of corporate taxes. We use questionnaires to determine the role of corporations in expanding the scope of tax management and discover an increased effect of corporate planning. Moreover, we offer a model of corporate tax planning considering the opportunity areas. This model determines the taxation framework for a company. We have developed a map to determine the degree of effective tax planning for a company. Finally, we use the functional-activity model of the tax planning process to substantiate the conclusion that the responsibility of the participants in such a process stipulates good business reputation. In general, our results suggest that corporate tax planning is an effective way to optimize tax liabilities.

scholarly journals General Counsel Prominence and Corporate Tax Policy

2015 ◽  
Vol 38 (1) ◽  
pp. 39-56 ◽  
Author(s):  
John L. Abernathy ◽  
Thomas R. Kubick ◽  
Adi Masli
Keyword(s):  
Tax Policy ◽  
Top Management Team ◽  
Management Team ◽  
Data Availability ◽  
Top Management ◽  
General Counsel ◽  
Corporate Tax ◽  
Firm Level ◽  
Tax Aggressiveness

ABSTRACT Prior research provides evidence that individual executives have a significant effect on firm-level tax policy. Further research has shown that having a corporate general counsel (GC) in a firm's top management team (top five highest-paid executives) significantly affects a firm's accounting and disclosure practices. In this paper, we examine the role of the GC in corporate tax policy. Specifically, we use the ascension of the corporate GC to top management as the identifying event in which the role and influence of the corporate GC becomes more salient. We find strong evidence that GC ascension to top management is associated with an increase in tax aggressiveness, as evidenced by greater book-tax differences and a higher likelihood of engaging in tax shelter activities. Data Availability: Data are obtained from public sources identified in the paper.

Does Schedule UTP Have Uniform Long-Run Effects on Corporate Tax Planning?

2017 ◽  
Vol 39 (2) ◽  
pp. 63-79 ◽  
Author(s):  
Kim Honaker ◽  
Divesh S. Sharma
Keyword(s):  
Tax Planning ◽  
Internal Revenue Service ◽  
Tax Rates ◽  
Corporate Tax ◽  
Difference In Differences ◽  
Effective Tax Rates ◽  
Long Run ◽  
Foreign Presence ◽  
Two Measures ◽  
Tax Benefits

ABSTRACT This study investigates the effects of the Internal Revenue Service requiring confidential Schedule UTP disclosures on corporate tax planning over the period from 2008 to 2013. We make three important observations using a difference-in-differences design and two measures of tax planning. First, we find that firms generally report significantly lower current year uncertain tax benefits in the Schedule UTP reporting era. Second, we find these firms do not exhibit a change in cash effective tax rates. Third, we observe that while aggressive tax-planning firms and firms with more foreign presence likely face greater risk with increased transparency under Schedule UTP disclosures, these firms do not exhibit a response to Schedule UTP that is significantly different from that of other firms. Collectively, our results suggest that firms appear to have uniformly adjusted their reporting of uncertain tax benefits without altering the underlying nature of their tax planning.

The Outsourcing of Corporate Tax Function Activities

2001 ◽  
Vol 23 (2) ◽  
pp. 35-49 ◽  
Author(s):  
Amy E. Dunbar ◽  
John D. Phillips
Keyword(s):  
Transaction Costs ◽  
Economies Of Scale ◽  
Service Providers ◽  
Tax Compliance ◽  
Tax Planning ◽  
Asset Specificity ◽  
Corporate Tax ◽  
Factors Associated ◽  
Tax Professionals ◽  
The Status

This study investigates the factors associated with firms' decisions to outsource corporate tax-planning and -compliance activities. The results indicate that transaction costs relating to human-asset specificity, proprietary technology, and economies of scale, along with the status of firms' top tax professionals and recent growth, are factors that help explain variation in the proportion of 1997 tax-planning expenditures made to external service providers. In contrast, only firm size and growth help explain variation in the proportion of tax-compliance activities outsourced. Finally, the results indicate that firms with more of a tax-planning focus outsource greater (lesser) proportions of their tax-planning (-compliance) activities. These results provide the first empirical evidence relating to the economic motivations behind tax function outsourcing.

Sign in / Sign up

Export Citation Format

Share Document