To Shift or Not To Shift? Intertemporal Income Shifting as a Response to the Risk Capital Allowance Introduction in Belgium

Andries, Kathleen; Cools, Martine; Uytbergen, Steve Van

doi:10.1080/09638180.2016.1202854

Cited by 17 publications

(9 citation statements)

References 33 publications

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“…Firstly, this paper adds to the stream of literature assessing the determinants of accounting conservatism (Ahmed and Duellman, 2007;LaFond and Watts, 2008;Lara, Osma, and Penalva, 2009;Bona-Sanchez, Perez-Aleman, and Santana-Martin, 2011). Secondly, I shed additional light on the consequences of corporate tax avoidance especially tax avoidance via intertemporal profit shifting (Guenther, 1994;Maydew, 1997;Lin, Mills, and Zhang, 2013;Andries, Cools, and van Uytbergen, 2016). Thirdly, this paper contributes to the ongoing and topical debate on the benefits and/or drawbacks of book-tax conformity in financial accounting (Desai, 2005;Hanlon and Shevlin, 2005;Atwood, Drake, and Myers, 2010).…”

Section: Introductionmentioning

confidence: 86%

“…A tax rate differential between periods therefore provides an incentive to increase conservatism shortly before the tax rate is cut. Recent research showed that firms respond to tax rate differentials across borders (Collins, Kemsley, and Lang, 1998;Bartelsman and Beetsma, 2003;Huizinga and Laeven, 2008;Klassen and Laplante, 2012) and time (Guenther, 1994;Maydew, 1997;Lin, Mills, and Zhang, 2013;Andries, Cools, and van Uytbergen, 2016) to decrease their accounting effective tax rate (ETR) (Dyreng, Hanlon, and Maydew, 2008).…”

Section: Introductionmentioning

confidence: 99%

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Tax Avoidance and Accounting Conservatism

Bornemann

2018

SSRN Journal

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This study analyzes the relation between accounting conservatism, future tax rate cuts and countries' level of book-tax conformity. Firms have an incentive to increase conservatism in financial reporting when a tax rate cut is imminent to shift taxable income into the lower taxed future. Using a panel of firms across 18 countries from 1995 to 2010 I find that conditional conservatism is positively and significantly associated with future tax rate cuts when book-tax conformity is high. This effect is particularly pronounced for firms that concentrate the majority of their operations in the country in which the tax rate is cut. In contrast, there is no significant relation between future tax rate cuts and unconditional conservatism.

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Section: Introductionmentioning

confidence: 86%

Section: Introductionmentioning

confidence: 99%

Tax Avoidance and Accounting Conservatism

Bornemann

2018

SSRN Journal

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“…First, while the existing literature is limited to depreciations in financial accounts (e.g. Boynton et al 1992;Scholes et al 1992;Guenther 1994;Lopez et al 1998;Maydew 1997, Andries et al 2017Sundvik 2017), AFiD provides information on depreciations for tax accounting purposes. In spite of the relatively high level of book-tax conformity in Germany in 2007, there were major differences between depreciation regulations for financial accounting and tax accounting.…”

Section: Datamentioning

confidence: 99%

“…Previous studies suggest stronger intertemporal income shifting of tax-aggressive firms (Lopez et al 1998;Andries et al 2017), less shifting of firms with low marginal tax rates and shifting incentives (Boynton et al 1992;Manzon 1992), less intertemporal income shifting of firms with high financial reporting costs (Guenther 1994;Cloyd et al 1996;Kosi and Valentincic 2013) and more intertemporal shifting of private firms with typically lower financial reporting costs than public firms (Burgstahler 2006;Lin et al 2014).…”

Section: Introductionmentioning

confidence: 96%

Intertemporal Income Shifting Around a Large Tax Cut: the Case of Depreciations

Dobbins

Eichfelder

Hechtner

et al. 2018

Schmalenbach Bus Rev

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A corporate tax rate cut provides an incentive for corporations to shift taxable income from years before the tax rate cut to post-reform years. Our study analyzes whether depreciations and writeoffs are used to achieve intertemporal income shifting. Using a panel of German manufacturing firms, we test in a difference-indifferences setting whether firms reacted to the announced 2008 corporate tax rate cut of 10 percentage points by accumulating depreciation expenses in the prereform year. Our results suggest that depreciation expenses in 2007 are on average about 2.5% higher than in the other observation years. Our analysis also sheds light on heterogeneity in intertemporal income shifting across firms. We provide evidence for a weaker reaction of loss firms resulting from a lower tax incentive. By contrast, we find stronger intertemporal income shifting of large firms and especially firms with a relatively high share of new investments in the capital stock. While the first result is consistent with a higher cost-efficiency of tax planning of large firms, the second finding suggests that investments in the current year provide more discretion for (tax-induced) earnings management.

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“… Income Shifting through issuance of debt securities, Kathleen and Uytbergen [17] find evidence that public companies in Belgium tend to shift profits from one period to the next in response to capital reserves. Dharmapala and Riedel [18] found that the existence of tax incentives affects the policy of European multinational companies to determine the location where bonds will be issued, and because bond interest is a deductible expense, companies tend to choose the location to issue bonds in countries with high tax rates.…”

Section: A Income Shifting Strategies As Tax Avoidance Effortsmentioning

confidence: 99%

Income Shifting Strategy as a Reaction of Corporate Tax Rate Reduction and the Role of Auditors

Wijoyo¹

2021

Advances in Social Science, Education and Humanities Research

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This research aims to investigate income shifting strategy carried out by the company as a reaction to the corporate income tax rate decrease. It is conducted by the Indonesian government from 25 % to 22 % in 2020. Furthermore, this study also investigates the influence of audit quality upon the income shifting strategy. In contrast to existing research, this study used the book-tax difference approach to measure of income shifting. By using a sample of 51 public companies listed on the Indonesia Stock Exchange, the following results obtained: First, in 2019 the company performed income shifting in response to a decrease in corporate tax rates. Secondly, auditor quality gave a negative effect on income shifting.

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To Shift or Not To Shift? Intertemporal Income Shifting as a Response to the Risk Capital Allowance Introduction in Belgium

Cited by 17 publications

References 33 publications

Tax Avoidance and Accounting Conservatism

Tax Avoidance and Accounting Conservatism

Intertemporal Income Shifting Around a Large Tax Cut: the Case of Depreciations

Income Shifting Strategy as a Reaction of Corporate Tax Rate Reduction and the Role of Auditors

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