Taxes as a Determinant of Managerial Compensation in Privately Held Insurance Companies

2001 ◽  
Vol 76 (4) ◽  
pp. 655-674 ◽  
Author(s):  
Bin Ke
Keyword(s):  
Control Sample ◽  
Tax Planning ◽  
Managerial Compensation ◽  
Insurance Companies ◽  
Tax Rates ◽  
Investment Income ◽  
Federal Income Tax ◽  
Planning Decision ◽  
Privately Held Firms ◽  
Privately Held

This study empirically investigates how taxes affect managerial compensation for a sample of privately held insurers whose managers own a large percentage of the firm's stock (I refer to these as management-owned insurers) during 1989–1996. Shareholder/managers receive two types of income from the firm they own: compensation income as employees, and investment income as shareholders. Although compensation income is taxable to employees and deductible by employers, investment income is subject to double taxation. Thus, the mix of the two is an important tax-planning decision for management-owned insurers. I predict and find that as individual tax rates increased relative to corporate tax rates from 1989–1992 to 1993–1996, shareholder/managers paid themselves less tax-deductible compensation relative to a control sample of nonmanagement-owned insurers (i.e., privately held insurers with no managerial ownership). The study's results expand our understanding of management-owned, privately held firms' tax-planning strategies, and have implications for the efficiency of the federal income tax system.

Implications of Phase-Outs on Individual Marginal Tax Rates

1999 ◽  
Vol 21 (1) ◽  
pp. 45-72 ◽  
Author(s):  
Charles R. Enis ◽  
Leroy F. Christ
Keyword(s):  
Effective Rate ◽  
Algebraic Model ◽  
Tax Planning ◽  
Policy Implications ◽  
Tax Rates ◽  
Rate Structure ◽  
Multiple Phase ◽  
Marginal Tax Rates ◽  
Federal Income Tax ◽  
Phase Out

The goal of this paper is to show the behavior of effective marginal tax rates relative to statutory marginal tax rates within the rate structure of the present federal income tax regime. Understanding the behavior of effective marginal rates is important as these rates are a significant component of tax planning and decision making. Statutory marginal tax rates are explicitly stated in published rate schedules. Various deductions, exemptions and credits involved in determining the tax liability are phased out as gross income increases. These restrictions result in effective marginal tax rates that can exceed respective statutory rates. Substantial divergence between effective and statutory rates can occur when multiple phase-out provisions overlap and interact. This study develops an algebraic model using tax return information that converts statutory to effective marginal rates. Policy implications concerning simplifying the effective rate structure are also discussed.

A Model of Multinational Income Shifting and an Application to Tax Planning with E-Commerce

2014 ◽  
Vol 36 (2) ◽  
pp. 27-53 ◽  
Author(s):  
Kenneth J. Klassen ◽  
Stacie K. Laplante ◽  
Carla Carnaghan
Keyword(s):  
Tax Planning ◽  
Investment Model ◽  
Income Shifting ◽  
Tax Rates ◽  
Foreign Investments ◽  
Effective Tax Rates ◽  
Tax Rate ◽  
Foreign Earnings ◽  
Joint Consideration ◽  
The U.S

ABSTRACT: This manuscript develops an investment model that incorporates the joint consideration of income shifting by multinational parents to or from a foreign subsidiary and the decision to repatriate or reinvest foreign earnings. The model demonstrates that, while there is always an incentive to shift income into the U.S. from high-foreign-tax-rate subsidiaries, income shifting out of the U.S. to low-tax-rate countries occurs only under certain conditions. The model explicitly shows how the firms' required rate of return for foreign investments affects both repatriation and income shifting decisions. We show how the model can be used to refine extant research. We then apply it to a novel setting—using e-commerce for tax planning. We find firms in manufacturing industries with high levels of e-commerce have economically significant lower cash effective tax rates. This effect is magnified for firms that are less likely to have taxable repatriations. JEL Classifications: G38, H25, H32, M41.

scholarly journals PENGARUH PERENCANAAN PAJAK TERHADAP MANAJEMEN LABA YANG DIMODERASI OLEH PENURUNAN TARIF PAJAK (DISKON PAJAK)

2020 ◽  
Vol 16 (1) ◽  
pp. 85-95
Author(s):  
Oma Romantis ◽  
Kurnia Heriansyah ◽  
Soemarsono D.W ◽  
Widyaningsih Azizah
Keyword(s):  
Earnings Management ◽  
Secondary Data ◽  
Sampling Technique ◽  
Financial Statements ◽  
Total Sample ◽  
Tax Planning ◽  
Tax Rates ◽  
Panel Data Regression ◽  
Analysis Technique ◽  
Data Regression

The aims of this study to examine the effect of tax planning on earnings management which is moderated by reducing tax rates (tax discounts). The population in this study are companies listed in the 2017-2018 LQ45 index. The sampling technique in this study used a purposive sampling method with predetermined criteria, in order to obtain a total sample of 23 companies with final data totaling 46 financial statements. The type of data is secondary data obtained from www.idx.co.id. The analysis technique used in this study is panel data regression analysis and is processed using the Eviews 9.0 program. The results of this study indicate that tax planning has a significant effect on earnings management with a negative coefficient direction. A reduction in tax rates (tax discounts) weakens the effect of tax planning on earnings management.

scholarly journals Valuation And Market Timing In Private M&A Transactions

2011 ◽  
Vol 1 (8) ◽  
Author(s):  
Ted Azarmi ◽  
Florian Eisele ◽  
Christine Haecker
Keyword(s):  
Market Timing ◽  
Point Of View ◽  
Font Size ◽  
Private Companies ◽  
Maximum Price ◽  
Business Conditions ◽  
Privately Held Firms ◽  
Time Required ◽  
The Right ◽  
Privately Held

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-size: 10pt; mso-bidi-font-size: 12.0pt;"><span style="font-family: Times New Roman;">The objective of this case is to teach and initiate a classroom discussion about the optimal market timing for the sale of a mid-cap privately held firm.<span style="mso-spacerun: yes;">&nbsp; </span>The discussion is facilitated by a real world case example that focuses on the sale of a Little Rock, AK based plastic injection molding company with approximately $20 million in revenues.</span></span></p><p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-size: 8pt;"><span style="font-family: Times New Roman;">&nbsp;</span></span></p><p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-size: 10pt; mso-bidi-font-size: 12.0pt;"><span style="font-family: Times New Roman;">Theoretical and practical issues central to receiving maximum price in relation to selling at the right time are addressed.<span style="mso-spacerun: yes;">&nbsp; </span>Considered are the desired time to close the deal from the owner&rsquo;s point of view, the time required for successful completion of the sale process, business conditions in this industry, firm-specific business conditions, and ability of agents to time this market.<span style="mso-spacerun: yes;">&nbsp; </span></span></span></p><p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-size: 8pt;"><span style="font-family: Times New Roman;">&nbsp;</span></span></p><p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-size: 10pt; mso-bidi-font-size: 12.0pt;"><span style="font-family: Times New Roman;">This case also discusses various reasons for the sale of private companies and the effect of respective sale motives on the placement of these firms.<span style="mso-spacerun: yes;">&nbsp; </span>Principally, the retirement decision by the owners of small privately held firms as the most frequent reason for the sale of these companies is explored.</span></span></p>

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