Why Do Not All Firms Engage in Tax Avoidance?

Jacob, Martin; Rohlfing-Bastian, Anna; Sandner, Kai

doi:10.2139/ssrn.2536268

Cited by 9 publications

(9 citation statements)

References 66 publications

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“…However, only a minority of German firms (and firms worldwide) are public firms. Additionally, more than half of the GDP in OECD countries is generated by private firms (e.g., Jacob, Rohlfing-Bastian, & Sandner, 2016). We find that public family firms avoid taxes significantly more than private family firms (i.e., negative coefficient on PUBLIC in all tests).…”

Section: Discussionmentioning

confidence: 99%

Family Firm Heterogeneity and Tax Avoidance: The Role of the Founder

Brune

Thomsen

Watrin

2019

Family Business Review

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Family business research suggests that the population of family firms cannot be regarded as a homogenous group. Therefore, with respect to tax avoidance, we analyze the role of the founder as one dimension of family firm heterogeneity. Specifically, we consider socioemotional wealth loss aversion and find that founders may affect the level of tax avoidance not only when they have direct influence (i.e., serving as CEO) but also when they possess solely indirect influence (i.e., having substantial ownership or a seat on the board). Overall, our results suggest that founders remain attached to their firms despite giving up executive positions.

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Section: Discussionmentioning

confidence: 99%

Family Firm Heterogeneity and Tax Avoidance: The Role of the Founder

Brune

Thomsen

Watrin

2019

Family Business Review

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“…The study of Jacob et al (2016) presents a model that comes to different conclusions as Badertscher et al (2013). According to these authors the impact of separating ownership from control on tax avoidance depends on the potential to increase earnings.…”

Section: Background and Empirical Predictionsmentioning

confidence: 99%

“…The authors assert that tax planning depends on the interaction of the following three factors: firm-level costs; incentivization costs at the agent-level; and the potential to increase earnings. They assert that firms with high firm-level costs, such as reputational or political costs, but low incentivization costs tend to engage in more aggressive tax planning compared to other firms if the potential to increase earnings is low; the opposite is true if the potential to increase earnings is high (Jacob et al , 2016).…”

Section: Background and Empirical Predictionsmentioning

confidence: 99%

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Tax avoidance in management-owned firms: evidence from Brazil

Cabello

Gaio

Watrin

2019

IJMF

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Purpose The purpose of this paper is to test if companies with a greater concentration of management ownership (and thus more risk-averse managers) avoid less tax. Design/methodology/approach The authors use a regression analysis with panel data, using as a sample of Brazilian companies from 2001 to 2015. The authors investigate the impact of insider ownership on tax avoidance, testing how and how much different ownership levels of inside owner are associated with tax avoidance measured by effective tax rates and book-tax differences. Findings The results indicate that different levels of management ownership are associated with different levels of tax avoidance behavior. Originality/value This paper contributes to the literature showing that ownership and decision making are not always focused on only a few decision makers. The owners are likely to be more risk averse and therefore less willing to invest in risky projects such as tax avoidance.

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“… Apart from quantitative empirical studies, some examples of model‐based/theoretical work include Chen and Chu (), Crocker and Slemrod (), Lipatov (), and Jacob, Rohlfing‐Bastian, and Sandner (), while experimental or qualitative research is still underrepresented (e.g., Wilson ; Eberhartinger and Fellner ). …”

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confidence: 99%

The Three Hurdles of Tax Planning: How Business Context, Aims of Tax Planning, and Tax Manager Power Affect Tax Expense

Feller

Schanz

2016

Contemporary Accting Res

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The question of why some companies pay fewer taxes than others is a widely investigated topic of interest. One of the well-known explanations is a phenomenon called tax avoidance.We develop a grounded theory model of influences on corporate tax planning through a series of 19 in-depth German tax expert interviews. Our research identifies three independent hurdles in the tax planning process, which can help to explain different levels of tax expense across companies. Those three hurdles sequentially address which tax planning methods are available (defined by business characteristics), desirable (given via aims of tax planning), and implementable (determined by tax manager power). A large part of previous research has estimated the influence of firm characteristics, which we incorporate in the broader term business characteristics, on tax expense, while the other influences that we identify have largely been left "out of the equation." In the light of the current public debates on tax avoidance, we reveal two important findings: First, we find that companies vary widely in the aggressiveness of their aims of tax planning, which contrasts sharply with the picture often drawn by undifferentiated media reports. Second, tax managers can assume very different levels of power in their organization. The implementation of desirable tax planning methods varies depending on this level of tax manager power. In conclusion, our three-hurdle grounded theory provides generalizable insights into important influences on corporate tax planning which help to explain the observed variation in tax expenses across firms.Les trois obstacles a la planification fiscale : comment le contexte d'entreprise, les objectifs de la planification fiscale et le pouvoir de la direction de la fiscalit e influent sur la charge d'impôt A la lumi ere des d ebats publics actuels sur l' evitement fiscal, les auteures font deux constatations importantes. En premier lieu, elles observent que les entreprises diff erent largement quant a l'audace de leurs objectifs de planification fiscale, ce qui contraste radicalement avec le portrait souvent trac e dans les reportages sch ematiques des m edias. En second lieu, les directions de la fiscalit e peuventêtre investies de pouvoirs tr es diff erents au sein des organisations. La mise en oeuvre de m ethodes de planification fiscale souhaitables varie selon l'ampleur de ces pouvoirs. En conclusion, la th eorie des trois obstacles, fond ee sur les donn ees, que proposent les auteurs livre des indications pouvantêtre g en eralis ees en ce qui a trait aux influences importantes auxquelles est soumise la planification fiscale de l'entreprise, ce qui contribue a expliquer la disparit e observ ee dans les charges d'impôt des entreprises.

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Why Do Not All Firms Engage in Tax Avoidance?

Cited by 9 publications

References 66 publications

Family Firm Heterogeneity and Tax Avoidance: The Role of the Founder

Family Firm Heterogeneity and Tax Avoidance: The Role of the Founder

Tax avoidance in management-owned firms: evidence from Brazil

The Three Hurdles of Tax Planning: How Business Context, Aims of Tax Planning, and Tax Manager Power Affect Tax Expense

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