Incentives for Tax Planning and Avoidance: Evidence from the Field

Accounting Review - Tập 89 Số 3 - Trang 991-1023 - 2014
John R. Graham1, Michelle Hanlon2, Terry Shevlin3, Nemit Shroff2
1Duke University
2Massachusetts Institute of Technology,
3University of California, Irvine

Tóm tắt

ABSTRACT We analyze survey responses from nearly 600 corporate tax executives to investigate firms' incentives and disincentives for tax planning. While many researchers hypothesize that reputational concerns affect the degree to which managers engage in tax planning, this hypothesis is difficult to test with archival data. Our survey allows us to investigate reputational influences and, indeed, we find that reputational concerns are important—69 percent of executives rate reputation as important and the factor ranks second in order of importance among all factors explaining why firms do not adopt a potential tax planning strategy. We also find that financial accounting incentives play a role. For example, 84 percent of publicly traded firms respond that top management at their company cares at least as much about the GAAP ETR as they do about cash taxes paid and 57 percent of public firms say that increasing earnings per share is an important outcome from a tax planning strategy. JEL Classifications: D83; G31, M41. Data Availability: Survey responses are confidential. Other data are available from public sources identified in the paper.

Từ khóa


Tài liệu tham khảo

Altman, 1968, Financial ratios, discriminant analysis and the prediction of corporate bankruptcy, Journal of Finance, 23, 589, 10.1111/j.1540-6261.1968.tb00843.x

Altman, 2000, Predicting financial distress of companies: Revisiting the Z-score and Zeta models, Working Paper

Armstrong, 2012, The incentives for tax planning, Journal of Accounting and Economics, 53, 391, 10.1016/j.jacceco.2011.04.001

Austin, C., and R. Wilson. 2013. Are Reputational Costs a Determinant of Tax Avoidance?Working paper, The University of Iowa.

Bankman, 2004, An academic's view of the tax shelter battle, The Crisis in Tax Administration, 9

Bens, 2003, Employee stock options, EPS dilution, and stock repurchases, Journal of Accounting and Economics, 36, 51, 10.1016/j.jacceco.2003.10.006

Brav, 2005, Payout policy in the 21st century, Journal of Financial Economics, 77, 483, 10.1016/j.jfineco.2004.07.004

Chen, 2010, Are family firms more tax aggressive than non-family firms?, Journal of Financial Economics, 95, 41, 10.1016/j.jfineco.2009.02.003

Chyz, 2013, Personally tax aggressive executives and corporate tax sheltering, Journal of Accounting and Economics, 56, 311, 10.1016/j.jacceco.2013.09.003

Dechow, 2010, Understanding earnings quality: A review of the proxies, their determinants and their consequences, Journal of Accounting and Economics, 50, 344, 10.1016/j.jacceco.2010.09.001

Desai, 2006, Corporate tax avoidance and high-powered incentives, Journal of Financial Economics, 79, 145, 10.1016/j.jfineco.2005.02.002

Desai, 2008, Taxation and corporate governance: An economic approach, Tax and Corporate Governance, 13

Desai, 2009, Earnings management, corporate tax shelters, and book–tax alignment, National Tax Journal, 169, 10.17310/ntj.2009.1.08

Desai, 2009, Corporate tax avoidance and firm value, Review of Economics and Statistics, 91, 537, 10.1162/rest.91.3.537

Dhaliwal, 1994, The taxable and book income motivations for a LIFO layer liquidation, Journal of Accounting Research, 32, 278, 10.2307/2491286

Dyreng, 2008, Long-run corporate tax avoidance, The Accounting Review, 83, 61, 10.2308/accr.2008.83.1.61

Engle, 1999, Debt-equity hybrid securities, Journal of Accounting Research, 37, 249, 10.2307/2491409

Erickson, 2004, How much will firms pay for earnings that do not exist? Evidence of taxes paid on allegedly fraudulent earnings, The Accounting Review, 79, 387, 10.2308/accr.2004.79.2.387

Ernst & Young, 2011, 2011–2012 Tax risk and controversy survey: A new era of global risk and uncertainty

Frank, 2009, Tax reporting aggressiveness and its relation to aggressive financial reporting, The Accounting Review, 84, 467, 10.2308/accr.2009.84.2.467

Gallemore, J., E. L. Maydew, and J. R. Thornock. 2014. The reputational costs of tax avoidance. Contemporary Accounting Research (forthcoming).

Graham, 2001, The theory and practice of corporate finance: Evidence from the field, Journal of Financial Economics, 60, 187, 10.1016/S0304-405X(01)00044-7

Graham, 2010, Barriers to mobility: The lockout effect of U.S. taxation of worldwide corporate profits, National Tax Journal, 63, 1111, 10.17310/ntj.2010.4S.12

Graham, 2011, Real effects of accounting rules: Evidence from multinational firms' investment location and profit repatriation decisions, Journal of Accounting Research, 49, 137, 10.1111/j.1475-679X.2010.00395.x

Graham, 2005, The economic implications of corporate financial reporting, Journal of Accounting and Economics, 40, 3, 10.1016/j.jacceco.2005.01.002

Guenther, 1994, Earnings management in response to corporate tax rate changes: Evidence from the 1986 Tax Reform Act, The Accounting Review, 69, 230

Hanlon, 2012, Testimony before the U.S. House of Representatives Committee on Ways and Means. (February 8)

Hanlon, 2010, A review of tax research, Journal of Accounting and Economics, 50, 127, 10.1016/j.jacceco.2010.09.002

Hanlon, 2007, An empirical examination of corporate tax noncompliance, Taxing Corporate Income in the 21st Century, 10.1017/CBO9780511510823.014

Hanlon, 2009, What does tax aggressiveness signal? Evidence from stock price reactions to news about tax shelter involvement, Journal of Public Economics, 93, 126, 10.1016/j.jpubeco.2008.09.004

Hoopes, 2012, Do IRS audits deter corporate tax avoidance?, The Accounting Review, 87, 1603, 10.2308/accr-50187

Kocieniewski, 2011, G.E.'s strategies let it avoid taxes altogether, The New York Times

Larsen, 2007, Session 5: Developing a global corporate tax risk strategy, Taxes—The Tax Magazine (June), 83

Lisowsky, 2010, Seeking shelter: Empirically modeling tax shelters using financial statement information, The Accounting Review, 85, 1693, 10.2308/accr.2010.85.5.1693

Matsunaga, 1992, Disqualifying dispositions of incentive stock options: Tax benefits versus financial reporting costs, Journal of Accounting Research, 30, 37, 10.2307/2491192

Maydew, 1997, Tax-induced earnings management by firms with net operating losses, Journal of Accounting Research, 35, 83, 10.2307/2491468

McGill, 2004, Lost in translation: Detecting tax shelter activity in financial statements, National Tax Journal, 57, 739, 10.17310/ntj.2004.3.13

McIntyre, R., M. Gardner, R. Wilkins, and R. Phillips. 2011. Corporate Taxpayers and Corporate Tax Dodgers 2008–10. A Joint Project of Citizens for Tax Justice & The Institute on Taxation and Economic Policy. Available at: http://www.ctj.org/corporatetaxdodgers/CorporateTaxDodgersReport.pdf

Mills, 1996, Corporate tax compliance and financial reporting, National Tax Journal, 49, 421, 10.1086/NTJ41789215

Mills, 1998, Book-tax differences and Internal Revenue Service adjustments, Journal of Accounting Research, 36, 343, 10.2307/2491481

Mills, 2013, The effect of political sensitivity and bargaining power on taxes: Evidence from federal contractors, The Accounting Review, 88, 977, 10.2308/accr-50368

Mills, 2000, Strategic tax and financial reporting decisions: Theory and evidence, Contemporary Accounting Research, 17, 85, 10.1111/j.1911-3846.2000.tb00912.x

Murray, 2002, Inflated profits in corporate books is half the story, Wall Street Journal

Rego, 2012, Equity risk incentives and corporate tax aggressiveness, Journal of Accounting Research, 50, 775, 10.1111/j.1475-679X.2012.00438.x

Robinson, 2010, Performance measurement of corporate tax departments, The Accounting Review, 85, 1035, 10.2308/accr.2010.85.3.1035

Scholes, 1992, Firms' responses to anticipated reductions in tax rates: The Tax Reform Act of 1986, Journal of Accounting Research, 30, 161, 10.2307/2491200

Scholes, M., M. Wolfson, M. Erickson, M. Hanlon, E. Maydew, and T. Shevlin. 2014. Taxes and Business Strategy: A Planning Approach. Fifth edition. Englewood Cliffs, NJ: Pearson.

Shackelford, 2001, Empirical research in accounting, Journal of Accounting and Economics, 31, 321, 10.1016/S0165-4101(01)00022-2

Shackelford, D., J. Slemrod, and J. Sallee. 2011. A Unifying Model of How the Tax System and Accounting Rules Affect Corporate Behavior. Working paper, University of Michigan.

Slemrod, 1996, The income tax compliance cost of big business, Public Finance Quarterly (October), 24, 411, 10.1177/109114219602400401

Slemrod, 2002, The income tax compliance cost of large and midsize businesses, A report to the IRS LMSB Division

Trahan, 1995, Bridging the theory-practice gap in corporate finance: A survey of chief financial officers, Quarterly Review of Economics and Finance, 35, 73, 10.1016/1062-9769(95)90063-2

Zimmerman, 1983, Taxes and firm size, Journal of Accounting and Economics, 5, 119, 10.1016/0165-4101(83)90008-3

Thông tin
Thông tin xuất bản

Accounting Review

Tập 89 Số 3

991-1023

Thông tin tác giả