Incentives for Tax Planning and Avoidance: Evidence from the Field
Author(s)Graham, John R.; Hanlon, Michelle; Shevlin, Terry; Shroff, Nemit
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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.
DepartmentSloan School of Management
The Accounting Review
American Accounting Association
Graham, John R., Michelle Hanlon, Terry Shevlin, and Nemit Shroff. “Incentives for Tax Planning and Avoidance: Evidence from the Field.” The Accounting Review 89, no. 3 (May 2014): 991–1023.
Author's final manuscript