The Economic Effects of Special Purpose Entities on Corporate Tax Avoidance

Demeré, Paul; Donohoe, Michael P.; Lisowsky, Petro

doi:10.1111/1911-3846.12580

Cited by 23 publications

(10 citation statements)

References 105 publications

(204 reference statements)

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“…However, it is not clear yet whether the tax risk also has a role in such a relationship. Demeré et al (2020) contribute to the literature by investigating and finding that special purpose entities (SPE) accelerate a higher level of tax avoidance. However, there is no research as yet that has examined the impact of SPE on the corporate tax risk, both in the short and long term.…”

Section: Othersmentioning

confidence: 99%

Corporate tax risk: a literature review and future research directions

Saragih

Ali

2021

Manag Rev Q

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Our study aims to analyze the current state of, and avenues for, future studies into the tax risk literature. The construct of the corporate tax risk (tax uncertainty) has increasingly begun to attract significant interest from both academics and practitioners. Most previous studies discussing corporate tax behavior have also focused on tax planning, tax avoidance, and tax evasion. Studies investigating the tax risk are still very limited and it is an underexplored subject. Examining the tax risk is crucial because it relates to the tax outcomes arising from a firm's taxation activities. Furthermore, analyzing the tax risk simultaneously with other tax behavior constructs may provide a deeper understanding. Despite the importance of the tax risk construct, there is no published literature review regarding the tax risk. Using a systematic review process, this study selected 37 articles published in 21 highly reputable journals listed in the Scopus database. The findings of this study are provided in two sections: (1) A discussion of the current studies of tax risk, including the theories, methods, and measurements of tax risk, its determinants and consequences; and (2) Recommendations for future research agendas. From the review, we find that tax risk research still tends to be limited and understudied; many relevant research gaps can be identified. Finally, we suggest several research directions into 12 themes: corporate governance, executive personal characteristics, executive compensation plans, ownership structure, firm-level characteristics, the external market, institutional factor, accounting and auditing, operating environment, regulators and regulation, reputational costs, and others.

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Section: Othersmentioning

confidence: 99%

Corporate tax risk: a literature review and future research directions

Saragih

Ali

2021

Manag Rev Q

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“…Applying a tax loss from the previous periods is a legal way to influence the amount of tax liability. The amortization of the tax loss is not an obligation for the company but an opportunity to reduce the tax base (Demere et al;Borg 2013). Lisztwanova and Ratmanova (2018) also consider the tax loss as one of the significant factors affecting the total corporate income tax in the Czech Republic.…”

Section: Resultsmentioning

confidence: 99%

Tax Loss Amortization of Companies in Slovakia

Bánociová

Tahlova

2020

JRFM

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The purpose of this article is to research how companies optimize income tax with the ambition to maintain the achieved sales and profits at the highest possible level. Its purpose is to find out whether companies in Slovakia compensate for higher tax liability by tax loss amortization to reduce their income tax payable. Based on the review of literature from the field of legislation concerning the tax loss amortization by using the descriptive statistics of selected corporate and tax indicators, the companies are monitored in order to capture their behavior in paying income tax. The methods of deduction and synthesis are used in this article. The observed corporate and tax indicators are focusing on the relationship between the tax liability arising from corporate income tax, amortized tax losses, and the amount of tax payable in Slovakia in the period from 2015 to 2018. Tax loss can be considered as a tool for tax optimization, which is used by companies in all countries of the European Union, while the scope of its applicability is often limited by a time horizon. The amortization of tax losses has an impact on the amount of tax levied and the subsequent income tax payable, while the possibility to use this tool of tax optimization is influenced by the changing legislation in the period under review.

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“…US multinationals (MNCs) operate through complex foreign organizational structures, yet little research examines the determinants or consequences of foreign subsidiary decisions. The limited evidence shows that organizational structure decisions are a key element of certain tax planning strategies, such as special purpose entities (Demeré et al 2020), flow‐through entity classifications (Agarwal et al 2021), and arranging foreign affiliates within the equity supply chain (Dyreng et al 2015). In this study, I examine firms' reliance on foreign holding companies, separate legal entities that facilitate internal financing and tax planning.…”

Section: Introductionmentioning

confidence: 99%

Foreign Holding Companies and the US Taxation of Foreign Earnings: Evidence from the Tax Increase Prevention and Reconciliation Act of 2005*

Murphy¹

2023

Contemporary Accting Res

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I analyze US multinationals' (MNCs) use of foreign holding companies in their organizational structures and the impact of holding companies on internal capital markets. The look‐thru rule in the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) reduces the after‐tax cost of foreign intercompany financing transactions. I use TIPRA as a natural experimental setting to test whether a shift in US tax policy that reduces the cost of moving foreign capital increased firms' reliance on foreign holding company subsidiaries. I find that MNCs responded to TIPRA by creating more foreign holding companies. Furthermore, consistent with the policy objectives of TIPRA, I document that MNCs that rely on holding companies gained tax efficiencies in their post‐TIPRA foreign internal capital markets, reducing domestic taxation on foreign earnings and easing financial constraints. Overall, my results expand our understanding of foreign organizational structure decisions and their internal financing benefits. I contribute to the tax literature by documenting a response to TIPRA that sheds light on the growing complexity of foreign subsidiary ownership structures.

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The Economic Effects of Special Purpose Entities on Corporate Tax Avoidance

Cited by 23 publications

References 105 publications

Corporate tax risk: a literature review and future research directions

Corporate tax risk: a literature review and future research directions

Tax Loss Amortization of Companies in Slovakia

Foreign Holding Companies and the US Taxation of Foreign Earnings: Evidence from the Tax Increase Prevention and Reconciliation Act of 2005*

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