Are U.S. Multinational Corporations Becoming More Aggressive Income Shifters?

Klassen, Kenneth J.; Laplante, Stacie Kelley

doi:10.2139/ssrn.1815320

Cited by 33 publications

(33 citation statements)

References 51 publications

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“…Overall, the findings for transfer pricing aggressiveness and foreign tax rate differential are particularly important here as they denote major areas of uncertainty for a firm (Klassen & Laplante, 2012a, 2012b, and are likely to be responsible for the large erosion of corporate tax revenues (Department of the Treasury, 2007). In fact, these results show that audit specialization increases the level of uncertainty associated with a firm's tax position that comprise transfer pricing or foreign tax rate differentials.…”

Section: Regression Results: the Impact Of Audit Specialization On mentioning

confidence: 99%

“…Income-shifting arrangements generally comprise transfer pricing aggressiveness, the use of tax havens, and exploitation of arbitrage opportunities based on foreign tax rate differentials (Klassen & Laplante, 2012a, 2012b.…”

Section: Income-shifting Arrangements and Unrecognized Tax Benefits-h1mentioning

confidence: 99%

“…1 Second, it analyzes the impact of audit specialization on the association between income-shifting arrangements and UTBs. Income shifting can be described as a plan or structure that leads to more income being earned in low-tax jurisdictions than would otherwise be expected based on a firm's worldwide asset allocation (Klassen & Laplante, 2012a). Income-shifting arrangements impose a significant amount of uncertainty as reflected in the calculation of a firm's UTBs (Lisowsky, Robinson, & Schmidt, 2013;Mills, Robinson, & Sansing, 2010;Rego & Wilson, 2012).…”

Section: Introductionmentioning

confidence: 99%

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Uncertain tax benefits, international tax risk, and audit specialization: Evidence from US multinational firms

2018

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The purpose of this study is twofold. First, it examines the association between income‐shifting arrangements consisting of transfer pricing aggressiveness, tax haven use and foreign tax rate differentials, and Financial Interpretation No. 48 (FIN48, now ASC740–10‐25) unrecognized tax benefits (UTBs). Second, it analyzes the impact of audit specialization on the association between income‐shifting arrangements and UTBs. Using a dataset of 286 US multinational firms over the 2007–2016 period (2,097 firm‐years), our regression results show that income‐shifting arrangements represented by transfer pricing aggressiveness, tax haven use and foreign tax rate differentials are significantly positively associated with UTBs. We also observe that audit specialization magnifies the positive association between transfer pricing aggressiveness and UTBs, and foreign tax rate differentials and UTBs. Finally, in additional analysis we provide some evidence that the positive association between income‐shifting arrangements and UTBs is magnified in the post‐2010 uncertain tax position reporting requirement period. Overall, our study extends prior research on the topic of audit characteristics (i.e., audit specialization) and tax aggressiveness.

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Section: Regression Results: the Impact Of Audit Specialization On mentioning

confidence: 99%

Section: Income-shifting Arrangements and Unrecognized Tax Benefits-h1mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Uncertain tax benefits, international tax risk, and audit specialization: Evidence from US multinational firms

2018

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“…Additionally, income tax expense is not collected in every survey. For these various reasons, it is not possible for us to construct a multiple-period income tax incentive measure as in Klassen and LaPlante (2012a). 16.…”

Section: Conflicting Transfer Pricing Incentives (Conflict)mentioning

confidence: 99%

Conflicting Transfer Pricing Incentives and the Role of Coordination

Blouin

Robinson

Seidman

2018

Contemporary Accting Res

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Our study evaluates the role of coordination, at both the government and the firm level, on the transfer prices set by U.S. multinational corporations (MNCs) when income taxes and duties cannot be jointly minimized with a single transfer price. We find that either the presence of a coordinated income tax and customs enforcement regime or coordination between the income tax and customs functions alters transfer prices for these firms. Our analyses have implications for both firms and taxing authorities. Specifically, our findings suggest that MNCs might decrease their aggregate tax burdens by increasing coordination within the firm or that governments might increase their aggregate revenues by improving coordinating enforcement across taxing authorities. Our study is novel in that we document, in a specific setting, how coordination influences MNCs’ tax reporting behavior.

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“…February 2015 ISSN 0265-5527, pp. 25-41 A vast range of tax benefits -also used to induce corporate investment and other 'desirable' business activities (Klassen and Laplante 2012;Sahadi 2013) -increase the opportunities for tax avoidance and help to expand the gap between statutory and effective tax rates (Citizens for Tax Justice 2013). An examination of OECD data reveals that the tax breaks offered to businesses in the late 2000s were annually worth around 1.5% of gross domestic product (GDP) in the UK and around 4.5% in the US (Organisation for Economic Cooperation and Development 2009).…”

Section: Contextualising Corporate Tax Avoidancementioning

confidence: 99%

Corporate Taxation, Corporate Power, and Corporate Harm

Farnsworth

Fooks

2015

Howard J Crim Justice

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Globalisation has increased corporate tax competition amongst states and facilitated widespread corporate tax avoidance. Some of the largest businesses now pay little or no tax: in some cases with the active assistance of governments. This article examines contemporary corporation tax policies, outlines some of the key methods corporations use to minimise their tax liabilities, explores the interdependencies between the demand for reduced tax liabilities and the professional infrastructure of tax planning and avoidance, and examines how the contemporary political economy of corporate taxation enhances the bargaining power of transnational corporations in the implementation of tax policy.

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Are U.S. Multinational Corporations Becoming More Aggressive Income Shifters?

Cited by 33 publications

References 51 publications

Uncertain tax benefits, international tax risk, and audit specialization: Evidence from US multinational firms

Uncertain tax benefits, international tax risk, and audit specialization: Evidence from US multinational firms

Conflicting Transfer Pricing Incentives and the Role of Coordination

Corporate Taxation, Corporate Power, and Corporate Harm

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