No abstract

Tax planning by firms is a highly significant activity. After audit fees, tax related services are the largest source of fee income for UK accounting firms. When viewed in terms of its impact, tax planning is the major source of the corporation tax gap amongst large firms (HMRC, 2010). Although traditionally tax planning has been viewed as benefiting shareholders via increased after tax earnings, more recently the underlying motivation has been questioned. Desai and Dharmapala (2006) (ETR) reconciliations, this paper reports such a negative relationship. Further, the relationship is robust to the inclusion of corporate governance measures which could be expected to moderate the potential implications of a tax related shareholder-manager information asymmetry. An innovation of this paper is in using the ETR reconciliations to examine sub-categories of tax planning activities. The paper contributes to the debate of who determines, and benefits from tax planning conducted by firms. Its findings have direct policy relevance for shareholders and tax administrations in monitoring and controlling firms' tax planning activities.

Using survey data we examine the relationship between various categories of non-audit services and audit fees. Compared to previous research, we use a more re ned classication of non-audit services both for incumbent and non-incumbent auditors, and control for the existence of an internal audit function and basis of disclosure. Our results suggest that the relationship between levels of audit fees and non-audit services varies by category of non-audit service. These results support explanations of the positive association between fees paid for non-audit services and audit fees in terms either of client speci c differences, e.g. organisational complexity, or of events giving rise to the purchase of more audit and non-audit services rather than in terms of direct economic linkages between the cost functions for audit and non-audit services. We speculate that the presence of another auditing rm at the client in a consulting capacity may exert competitive pressure on the fee for external audit.

Whilst there have been a number of papers that test the Watts and Zimmerman positive accounting hypotheses in a UK setting, no similar test has been made of the size effect using corporate tax burdens as a proxy for political costs. Using data for 5,998 year-ends from 1968 to 1993 this paper finds that: during 1968-79 there is evidence of a size effect; in a number of years a negative association between firm size and tax burden exists; and of the five industry categories examined, the 'mineral extractive' industry had the highest tax burden throughout the period 1968-1979. Copyright Blackwell Publishers Ltd 1998.

Wales. We especially thank Lynne Oats and two anonymous reviewers as well as conference and workshop participants for their constructive comments. We also gratefully acknowledge financial assistance from the ACCA. We are particularly grateful to the interview participants. 2The Market for Corporate Tax Knowledge Abstract A growing international literature advocates the importance of trust and co-operation in tax administration compared to the more traditional 'adversarial' approach. Yet, the global financial crisis has led to renewed interest in corporate tax planning and 'unacceptable' tax avoidance with a focus on the role of intermediaries such as accounting firms. This paper explores how developments in tax legislation are captured by companies and incorporated into their tax knowledge. We draw on prior literature in knowledge management, the role of accounting firms and tax administration and use a qualitative approach to investigate and describe the relationships between accounting firms, corporate taxpayers and revenue authorities, specifically the UK HM Revenue and Customs (HMRC). Our results show that these relationships can be described in the context of a tax knowledge market comprised of a knowledge seller, knowledge brokers, and knowledge buyers. Our findings have relevance not only for all three parties, in particular for the challenges facing knowledge brokers -but also to tax agencies and international organisations, who must strike the optimal balance between co-operative tax administration and traditional approaches buttressed by tax audit enforcement.