scholarly journals The Corporate Response to Government Attacks on Tax Shelters

2016 ◽  
Vol 8 (1) ◽  
pp. 126
Author(s):  
Noel P. Brock ◽  
Edward J. Schnee ◽  
Shane R. Stinson
Keyword(s):  
Tax Reform ◽  
Tax Avoidance ◽  
Discretionary Accruals ◽  
Corporate Tax ◽  
Corporate Response ◽  
Audit Firms ◽  
Tax Shelters ◽  
Corporate Tax Reform ◽  
Prior Literature ◽  
New Evidence

We examine the effectiveness of four federal government actions, all of which were designed to curb the proliferation of corporate tax shelters dating back to the 1990s, at eliciting measurable changes in characteristics commonly associated with tax shelter firms. Our results suggest that the government’s initial attacks on corporate tax shelters in the early 2000s elicited significant declines in book-tax differences, discretionary accruals, and the use of Big N audit firms, which contributed to gradual reductions in the estimated likelihood of tax sheltering for both multinational and purely domestic firms. Conversely, later attempts to discourage corporate tax shelters proved ineffective, likely due in part to the effectiveness of previous government attacks and a faltering economy. This study addresses calls from prior literature for a better understanding of factors determining corporate tax avoidance and offers new evidence of multi-faceted taxpayer reactions to corporate tax reform.

scholarly journals Institutional Ownership and Corporate Tax Avoidance: New Evidence

2016 ◽  
Vol 92 (2) ◽  
pp. 101-122 ◽  
Author(s):  
Mozaffar Khan ◽  
Suraj Srinivasan ◽  
Liang Tan
Keyword(s):  
Tax Avoidance ◽  
Institutional Ownership ◽  
Regression Discontinuity Design ◽  
Corporate Tax ◽  
Profit Margins ◽  
Exogenous Shocks ◽  
Analyst Expectations ◽  
Tax Shelters ◽  
New Evidence ◽  
Shed Light

ABSTRACT We provide new evidence on the agency theory of corporate tax avoidance (Slemrod 2004; Crocker and Slemrod 2005; Chen and Chu 2005) by showing that increases in institutional ownership are associated with increases in tax avoidance. Using the Russell index reconstitution setting to isolate exogenous shocks to institutional ownership, and a regression discontinuity design that facilitates sharper identification of treatment effects, we find a significant and discontinuous increase in tax avoidance following Russell 2000 inclusion. The tax avoidance involves the use of tax shelters, and immediate benefits include higher profit margins and likelihood of meeting or beating analyst expectations. Collectively, the results shed light on the effect of increased ownership concentration on tax avoidance.

How Internal Control Protects Shareholders' Welfare: Evidence from Tax Avoidance in China

2020 ◽  
Vol 19 (2) ◽  
pp. 19-39
Author(s):  
Hsihui Chang ◽  
Xin Dai ◽  
Yurun He ◽  
Maolin Wang
Keyword(s):  
Control Systems ◽  
Internal Control ◽  
Agency Costs ◽  
Tax Avoidance ◽  
Positive Association ◽  
Data Availability ◽  
Corporate Tax ◽  
Controlling Shareholders ◽  
The Public ◽  
Prior Literature

ABSTRACT This paper investigates how effective internal control protects shareholders' welfare in the context of corporate tax avoidance. Prior literature documents a positive association between internal control weakness and low tax avoidance. In this paper, we re-examine this association and complement prior research by finding that the direction of the association between internal control and tax avoidance depends on the level of tax avoidance. Specifically, for firms with low (high) levels of tax avoidance, internal control quality is positively (negatively) associated with tax avoidance. In additional analyses, we further explore how internal control mitigates agency costs for state-owned enterprises and tunneling activities. We show that for state-owned enterprises, which have lower incentives to avoid tax, effective internal control prevents managers from paying more taxes to cater to the controlling shareholders' interests. We also find that the association between tax avoidance and tunneling is reduced by effective internal control systems. Data Availability: Data are available from the public sources cited in the text.

Corporate Tax Reform

2007 ◽  
Vol 35 (3) ◽  
pp. 440-459 ◽  
Author(s):  
Gilbert E. Metcalf
Keyword(s):  
Tax Reform ◽  
Corporate Tax ◽  
Corporate Tax Reform

US corporate tax reform depends on issue linkage

2015 ◽  
Keyword(s):  
Common Ground ◽  
Tax Reform ◽  
Tax Rates ◽  
Corporate Tax ◽  
Full Spectrum ◽  
Effective Tax Rates ◽  
Content Type ◽  
White House ◽  
Corporate Tax Reform ◽  
The Eu

Significance Corporate tax may be one area where it could be possible to find some common ground between the otherwise gridlocked Republican Congress and the Democratic White House. President Barack Obama has proposed a one-time repatriation tax on cash held overseas by companies to be followed by a full-spectrum tax code overhaul. Impacts Lobbyists may support a repatriation amnesty, but will obstruct any initiative that raises effective tax rates. European Commission independence from member states may see the EU lead on corporate tax investigations. Australia will move slowly on corporate tax reform if the coalition government remains distracted by leadership disputes.

Sign in / Sign up

Export Citation Format

Share Document