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The Compliance Assurance Process (CAP) is a federally funded IRS corporate audit program. The program’s goal is to determine the best tax treatment for complex transactions before a corporation files its tax return. The US Department of the Treasury has voiced concerns regarding resource constraints and whether the program enhances public (nonprofessional investor) and investor confidence. We conduct a behavioral experiment using 176 Master of Business Administration and Master of Accounting students as proxies for nonprofessional investors. In the experiment, we examine the effects of CAP participation and corporate tax risk profile on judgments about financial statement credibility. We use a 2 × 2 experimental design with corporate tax risk profile manipulated as high risk or low risk and participation in CAP manipulated as participatory or non-participatory. This research investigates whether CAP program participation and/or tax risk level influence nonprofessional investors’ perceptions of the certainty and accuracy of the provision for income taxes. The results suggest both CAP program participation and tax risk influence nonprofessional investors’ perceptions of the certainty of the income tax provision; and tax risk also influences nonprofessional investors’ perception of the accuracy of the income tax provision.

This study examines the impact of FASB Interpretation No. 48 (FIN48), Accounting for Uncertainty in Income Taxes, on earnings management (EM) activity, by focusing on changes in the deferred tax asset valuation allowance (DTVA). FIN48 was adopted, in part, over concerns that firms were using the reserve for uncertain tax positions (cushion) to manage earnings. However, there are reasons to believe that the adoption of FIN48 may have impacted the extent to which firms utilize DTVA changes as a strategic accounting choice. As the provision for income taxes is one of the final accounts closed prior to an earnings announcement, income tax accounting is generally regarded as a final opportunity to strategically meet earnings goals. To the extent that FIN48 reduced cushion-based EM, firms may have increasingly used DTVA changes as a substitute. Alternatively, the attention that FIN48 brought to firms’ income tax footnotes may have curbed the strategic use of income tax accounting, in general. This study employs a sample of publicly traded US firms over the period of 2003–2010. A regression model and an analysis of the frequency of DTVA-based EM reveal no evidence of a systematic change in behavior attributable to FIN48. However, further analysis reveals that firms identified as managing earnings to meet analyst forecasts increasingly used discretionary DTVA changes relative to changes in tax cushion in the post-FIN48 period. The results have implications for existing research on income tax-based EM.

The extent to which firms repatriate indefinitely reinvested foreign earnings (IRFE) has been a major issue in the US tax system. Congress enacted provisions in the 2017 Tax Cuts and Jobs Act (TCJA) specifically to remove tax barriers to repatriation. However, little is known regarding the repatriation of IRFE outside of the temporary tax incentive provided by the 2004 American Jobs Creation Act (AJCA). In this chapter, I provide evidence on such repatriations by identifying a sample of 67 firms from 2009 to 2015 that reverse the indefinite reinvestment designation of foreign earnings and announce a repatriation of foreign cash. In contrast to repatriations following the 2004 AJCA, I do not find evidence that a single economic factor, such as share repurchases, motivates the repatriation. Although, in general, I do not find evidence of a significant market response to the announcements, I find evidence of a negative market reaction to announcements by low foreign effective tax rate (ETR) firms without tax offsets, suggesting that the tax may not be fully priced. Overall, I provide insight into the reasons and implications of the announced repatriation of IRFE.

The purpose of this paper is to examine the extent of corporate tax evasion and its implications on the protection of the shareholders and on the function of the capital market.

The extent of tax evasion of the Greek public companies is estimated on the basis of tax audit data. Unvariate tests are employed in order to assess the effect of the audit firm and to examine corporate tax behaviour.

The mean rate of tax evasion was estimated at about 16 per cent, showing that the incentive for tax evasion doesn't diminish when the companies are listed in the stock exchange. Specifically, the companies alter their tax behaviour (i.e. appear more tax compliant) only in the year of the IPO and the year before. It was also found out that the type of the audit firm is likely to affect the extent of tax evasion committed.

The present paper provides evidence that corporate tax evasion is widespread and calls for appropriate measures. Nowadays, this issue has become more crucial than ever, as Greece is in the middle of the financial crisis. Moreover, the findings regarding audit effectiveness in detecting tax evasion have significant implications, as the 2010 Greek tax bill grants the audit firms the right to issue certificates for tax purposes.

This paper contributes to the literature of fraudulent financial reporting by focusing on one specific form of fraud, which has been widely neglected – tax evasion.

A systematic assessment of multinational enterprise (MNE) tax minimisation strategies at the firm level is difficult. This paper aims to present systematic evidence for Ireland of tax minimisation strategies at both an aggregate and individual firm level. The paper uses Apple and Google as its case studies.

The paper is based on 31 US intellectual property (IP)-intensive MNEs with substantial operations in Ireland. Financial and other data including tax payments were extracted from Form 10K and filings in Companies Registration Office in Ireland.

The paper develops three different measures of effective tax rates and that tax strategies have resulted in effective tax rates lower than the nominal US tax rate and far lower than those published in company accounts. Although two-thirds of profits are earned outside the USA, around 70 per cent of corporate tax is paid in the USA.

The paper relies on data from a subset of MNEs operating in Ireland. The paper also uses publicly available data which may not be available for all firms.

The findings have implications for European Union (EU) tax policy and tax revenues in countries where MNEs operate. The paper also has implications for industrial policy based on attracting Foreign Direct Investment (FDI).

The study has implications not only for the equitable distribution of corporate tax payments and income distribution but also especially for a tax-based industrial policy.

MNE tax strategies, although of considerable public interest, are often obscure and poorly understood. The paper is original in providing a detailed examination of MNE tax strategies at the firm level and discussing some implications from a public policy perspective.

Against the background of increasing regulation and spotlight on the tax position of MNEs, this study explores the relationship between tax and performance measurement. The paper is informed by a series of in-depth semi-structured interviews conducted in 2006 with 26 senior tax executives from 15 Silicon Valley-based companies. We also draw on documentary evidence including the relevant 10K reports and take an interpretive approach to the analysis. Many of the performance measures referred to in prior literature were employed in the companies. There was no evidence to suggest the profit centre performance measurement model is being adopted by MNEs for their tax departments. Two distinct aspects particularly exercised the interviewees, that is, the effective tax rate (ETR) and post-tax versus pre-tax performance measurement. Many interviewees did not perceive the ETR as being an appropriate measure of performance, yet they recognised its importance internally and externally. Many companies worked on the basis that there is an ‘acceptable range’ of ETRs which won’t give rise to any unwanted questions. Most interviewees shared the view that a post-tax basis of measuring performance of business units might only serve to increase tax risks, preferring instead for the in-house tax executives to remain the exclusive tax knowledge experts. This study contributes to the diversification of tax research within accounting by demonstrating how qualitative work can provide unique insights. It enhances our understanding of how performance measurement of tax might influence the tax-planning behaviour of in-house tax executives and cautions against exclusive reliance on the ETR as a measure of the effect of tax planning.

Builds on the efforts of an earlier study to enhance marketers′ ability to evaluate earnings performance accurately by first presenting hands‐on illustrative examples of two approaches to adjusting the income statement for earnings shocks and estimating the earnings of core operations. Examines the impact on marketing managers of the “fallout” that may result from changes in management policies which are prompted by the perceptions of poor earnings performance. This fallout includes: challenges by upper management regarding the wisdom and effectiveness of the marketing strategy; marketers′ reduced ability to execute the marketing plan owing to cost‐cutting campaigns that result in reduced marketing expenditures (e.g. advertising and sales promotion expenditures); and higher projected rates of return (i.e. higher “hurdle rates”) required for investment proposals before they are considered acceptable. Concludes with the presentation of strategies which may be employed by marketers to respond to and negotiate with upper management when policy changes designed to cut operating and investment expenditures constrain marketers′ ability to execute marketing strategy aggressively and effectively.

Capital Gains Tax (or an equivalent charge to Corporation Tax) applies to any profit derived from the disposal of any interest in property. Any gain accruing on disposal (or other chargeable event) is computed under specific and detailed rules provided for in taxation legislation. Because of the variety of circumstances which can arise on the disposal of an asset (transactions otherwise than at arm's length, certain deemed disposals, disposals involving the receipt of premia etc), special problems can be encountered in assessing the amount of tax due. Such a problem is the assessment of capital gain for taxation purposes on assets whose lives have limited duration. These are known as wasting assets and include leasehold interests in property which are terminable interests with (usually) zero residual value. This paper examines the problems connected with the valuation of short leaseholds (ie, leases with less than a 50‐year term to run) and demonstrates that the specific and detailed rules for the valuation of these interests for the purpose of assessing capital taxation are at best inadequate and potentially inequitable.