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The purpose of the study is to investigate the impact of tax planning activities on the firm value of FTSE 100 firms. We employ static and dynamic panel regression analyses on a sample of 70 companies drawn from the UK FTSE 100 over a five-year period (2006–2010). Empirical evidence suggests that tax planning activity as measured by the proxies based on reported accounting information has a negative impact on firm value. Moreover, the results from the Generalized Methods of Moments (GMM) models suggest significant dynamics in firm value, i.e., the current firm value is positively affected by the past firm value. The findings imply the need for a full review of the adequacy and relevance of tax accounting disclosure and therefore have policy implications for accounting standard setters.

This study aims to investigate the moderating effect of equity-based compensation on the sources of book-tax differences. The authors investigate whether equity-based compensation affects the association between book-tax differences and tax planning, and the association between book-tax differences and earnings management.

The authors use a sample of 9,024 firm-year observations (913 firms) spanning the period 1992-2011, obtained from ExecuComp and Compustat. They estimate cross-sectional regressions of the proxy for tax planning, discretionary accruals and their interactions with equity-based compensation on book-tax differences.

The authors find that tax planning-related book-tax differences increase as the equity-based pay of executives does, and that earnings management-related book-tax differences decrease as the equity-based pay of executives increases. The results are robust across three alternative measures of tax planning.

Equity-based compensation plays an important role in managerial discretion on tax planning and earnings management. The findings suggest that, although equity incentives promote a high level of both tax planning and earnings management, they motivate managers to constrain the level of earnings management to avoid larger book-tax differences.

This paper focused on financial constraints scenario and tax planning activities of banks in Ghana. The study explores how financial constraints could motivate the banks to pursue tax planning mechanism and the implication on tax revenue mobilisation.

The paper followed generalised method of moments and fixed effect estimators to investigate the financial constrained-tax planning activity nexus. Simulation approach is adopted to provide financially constrained bank scenario. Besides contemporaneous analysis, sensitivity analysis is conducted to determine time varying effect. Data from all the 20 commercial banks which have operated from 2008 to 2018 were used.

The paper found that when banks are faced with financial constraints, they exhibit lower cash-effective-tax-rate. The decomposition analysis also revealed that financially constrained banks are likely to take on both short- and long-term tax planning opportunities. The paper also found evidence of persistence in the tax planning activities under financial constrained scenario.

This paper is one of the few studies which have extended the tax planning literature to the Ghanaian banking sector. Further novelty is seen from the development of financial constraint scenario from liquidity and solvency. Liquidity and solvency are the anchors for continuity of banking operation and sensitive to regulatory watch and sanctions. Therefore, by applying simulation approach to trigger financial constraints scenarios from these fundamental indicators reveals the extent to which commercial banks rely on tax planning opportunities to mitigate the consequence of financial constraints.

This paper aims to examine the design of optimal incentives for a firm’s tax department in the presence of information asymmetry.

This paper provides a theoretical model to examine the design of optimal incentives. The focus is on a situation in which a risk-averse tax department has private information about its efficiency type or effort to be exerted before the firm sets the incentive schemes.

This paper shows that a tax department’s risk aversion leads to a decline in the fraction of the cost borne by the tax department. It also shows that the optimal contract schemes should be designed to filter out as much uncontrollable risk as possible by using third-party information relevant to a tax department’s realized cost.

It contributes to a better understanding of the impact of corporate incentive plans on firms’ tax practices. This study, by designing a theoretical model, helps explain why there exist differences in tax planning across firms based on the finding that incentives for tax planning activities differ across firms.

This paper is the first study that considers the situation in which tax managers’ risk-averse and types, as well as relevant information collected by the firms, can be used to set up incentive schemes and investigates whether and how the incentive schemes will be affected when firms improve their prior information by acquiring relevant information before the tax department acts.

Drawing on the resource-based view (RBV), this study investigates how tax planning affects the likelihood of financial default in different stages of the corporate life cycle.

Collecting a large sample of US firms between 1989 and 2016, hypotheses are tested using a hazard model. Several robustness and endogeneity checks corroborate the main findings.

The results show that tax-planning firms are less likely to default in the introduction and decline stages, while they are more likely to default in the growth and maturity stages. The findings suggest that introductory and declining firms use cash resources obtained from tax planning efficiently to meet their needs and acquire other useful resources. In growing and mature firms, tax aggressiveness generates unnecessary slack resources, weakens managerial discipline and increases reputational risks.

The results shed light on the benefits and costs associated with tax planning throughout firms' life cycle, holding great significance for managers, investors, lenders and other stakeholders.

This study contributes to the literature that examines resource management at different life cycle stages by showing that cash resources from tax planning are managed in distinctive ways in each life cycle stage, having a varied impact on the likelihood of default. The authors shed light on underexplored cash resources. Furthermore, this study shows the potential linkages between the agency theory and RBV.

This paper aims to understand the international practices of tax planning. International companies choose their capital structure according to differences in international taxation, in order to minimize the tax burden of the whole company group. This paper reviews the literature that deals with international tax avoidance techniques by highlighting tax planning measurements in the empirical literature. The methodology used is the narrative approach of literature review, which consists on assembling and synthesizing previously published research. The paper concludes that there are several approaches of international tax planning including transfers of revenues by geographical area, redevelopment of the company, haven and loopholes in tax legislation. Moreover, finding more precise measures of tax planning techniques would be of great value to studies in this respect.

The authors follow the guideline provided by Templier and Pare (2015) in order to select the type of the literature review to use in this paper. Accordingly, this paper employs the narrative approach of literature review, which consists on assembling and synthesizing previously published research on international tax planning. This narrative review will serve as a starting point for future investigations and research developments. The authors rely on a logic of configuration in order to analyze data. This logic consists on addressing then organizing various aspects of international practices of tax planning.

The paper concludes that there are many aspects of international tax planning that need to be covered by future researchers, especially finding more precise measures of tax planning techniques would be of great value to studies in this respect.

The literature survey reveals the following issues. First, few studies have been conducted to date. Second, several approaches remain unexplored, and studies rely only on surveys' results collected from the annual report of companies (microeconomics variables), while macroeconomic variables can better explain the phenomenon of international tax planning. In this context, studies containing proposals to estimate more accurate international companies' tax planning techniques would also be welcome. Previous literature supposes premises on this issue th:at limit the accurateness of the analysis. Particularly, empirical literature is short of the proper measurement to evaluate corporate tax avoidance. This would explain the various interpretations of research findings. Hence, finding more precise measures of tax planning techniques would be of great value to studies in this respect.

This literature survey highlights recent studies dealing with tax planning theories within the framework of corporate governance. This theoretical framework particularly specifies which key variables are the most suitable for measuring tax planning methods and highlights the need to examine how those key variables might differ and under what circumstances. In addition, it underlines limits on tax planning measurements by addressing the comparison of the empirical measurements.

The paper contributes to the literature on internal tax planning in several ways. First, this study is unique in that it constitutes the only literature review that provides a comprehensive overview of research on international tax planning. Especially, it extends previous studies by considering the specific new trend of empirical literature dealing with the techniques of international tax planning. This literature review identifies two categories of tax planning approaches including techniques related to company internal management practices and international tax planning techniques. In addition, the literature survey helps to determine various strategies used by multinationals for tax planning, through an in-depth review of the existing studies. Finally, it provides researchers with a starting point to further explore issues related to tax avoidance techniques.

The existing literature documents mixed evidence toward the association between corporate social responsibility (CSR) and corporate tax planning (e.g., Davis, Guenther, Krull, & Williams, 2016; Hoi, Wu, & Zhang, 2013). In this study, I aim to identify a causal relationship between CSR and tax planning, leveraging the staggered adoptions of constituency statutes in US states, which is a plausibly exogenous shock to firms' emphasis on their social responsibility. In general, the statutes permit firm directors to consider the interests of all constituents when making business decisions, including those who benefit from firms paying their fair share of income taxes. Thus, the adoption of the statutes raises the importance of firms' social responsibility in paying income taxes. Employing a staggered difference-in-differences (DiD) method, I find that firms incorporated in states that have adopted constituency statutes exhibit significantly higher effective tax rates (ETRs) based on current tax expense. This causal relationship suggests that managers, with the legitimacy to consider the social impact of tax avoidance, become less aggressive in tax planning. I further find that the effect of adoption is stronger for financially unconstrained firms and firms in retail businesses, where the demand (cost) for tax avoidance is lower (higher). Finally, I show that my main results are driven by firms located in states with a high sense of social responsibility and firms with high levels of tax avoidance prior to the adoption. Overall, the findings in this chapter contribute to the literature by delineating a negative causal relationship between CSR and tax avoidance and identifying a positive social impact brought by the passage of constituency legislation.

This paper aims to examine the impact of corporate tax planning (TP) on tax disclosure (TD). Using tax expenses data set, with the detailed effective tax rate (ETR) by reconciling individual items of income and expenses.

A firm-level panel data set is used to analyse 286 non-financial listed companies on Bursa Malaysia that spans the period 2010-2012. Multivariate statistical analyses were run on the sample data. The empirical understanding of TD depends on public sources of data in the financial statement, characterized in the aggregated note of tax expenses. Fitting with Malaysian environment, the authors measured TD using modified ETR reconciling items.

Results show that TP, exhibit a robust positive influence on TD. This suggests that TP is related to lower corporate TD. In addition, companies with high TP attempt to mitigate the disclosure problem by increasing various TD. The authors further find significant positive impact between each of firm size and industry dummy, on TD. This means that company-specific characteristics are significant factors affecting corporate TD.

This study contributes to the literature on the effect of TP on TD. It depends on both the signalling theory and the Scholes–Wolfson framework, which are the main theories concerned with TP and TD. Therefore, from a theoretical side, the authors add to the current theories by verifying that users are the party influenced whether positively or negatively, by the extent of TD or the extent of TP activities through Malaysian organizations.

The evidence found in this paper has important policy and practical implications for the authorities, researchers, decision makers and company managers. The findings can provide them some relevant insights on the importance of TP actions from companies’ perspective and contribute to the discussion of who verifies and deduces from TD directed by companies.

This paper originality is regarded as the first attempt to examine the impact of TP on TD in a developing country such as Malaysia. Malaysian setting is an interesting one to examine because Malaysia could be similar to other countries in Southeast Asia. Results contribute significant insights to the discussion about TD regarding, which parties are responsible for the verification of TD by firms, and which parties benefit from this disclosure. Findings suggest that companies face a trade-off between tax benefits and TD when selecting the type of their TP.

This is the first report on estimates of tax compliance costs of Malaysian companies. Compliance cost is an unavoidable cost of doing business and arises from activities associated with the reporting of income for tax purpose. The average compliance cost per company was estimated to be RM68,836, which is RM0.26 per RM 1,000 sales turnover. Sixty‐one percent of compliance cost was incurred in computation‐related activities and 39 percent in tax planning activities. Measured relative to revenue, the compliance cost is higher for smaller companies than for larger companies, which suggests that compliance cost is regressive, a finding similar to those reported in other countries.

This paper examines the relationship between tax avoidance and accounting comparability. The authors argue that aggressive tax behavior impairs the comparability of financial statements by altering the accounting function, which maps economic events into accounting data.

The empirical analysis is based on a large sample of United States (US) firms. The authors use raw and industry-adjusted effective tax rates (ETRs) to proxy tax avoidance. The authors use the measure of accounting comparability developed by De Franco et al. (2011), which aims to capture the similarity of the accounting function.

The authors find that firms with more aggressive tax avoidance strategies have substantially lower accounting comparability. The evidence also shows that the negative effect of tax avoidance on accounting comparability is driven by firms with aggressive tax planning strategies beyond the industry norm. Furthermore, using an alternative measure of accounting comparability as a function of pre-tax income, the authors continue to find evidence of the negative effect of tax avoidance behavior. Importantly, this provides evidence that the effect of aggressive tax planning is not limited to the reported tax expense, but affects the comparability of the overall financial reporting system.

The authors identify a new potential cost of tax aggressive activities, being the loss of accounting comparability as driven by tax aggressive activities. The results contribute to the literature on the costs of tax avoidance and on the determinants of accounting comparability.