We investigate the association between aggressive tax and financial reporting and find a strong, positive relation. Our results suggest that insufficient costs exist to offset financial and tax reporting incentives, such that nonconformity between financial accounting standards and tax law allows firms to manage book income upward and taxable income downward in the same reporting period. To examine the relation between these aggressive reporting behaviors, we develop a measure of tax reporting aggressiveness that statistically detects tax shelter activity at least as well as, and often better than, other measures. In supplemental stock returns analyses, we confirm that the market overprices financial reporting aggressiveness. We also find that the market overprices tax reporting aggressiveness, but only for firms with the most aggressive financial reporting.

This study examines equity risk incentives as one determinant of corporate tax aggressiveness. Prior research finds that equity risk incentives motivate managers to make risky investment and financing decisions, since risky activities increase stock return volatility and the value of stock option portfolios. Aggressive tax strategies involve significant uncertainty and can impose costs on both firms and managers. As a result, managers must be incentivized to engage in risky tax avoidance that is expected to generate net benefits for the firm and its shareholders. We predict that equity risk incentives motivate managers to undertake risky tax strategies. Consistent with this prediction, we find that larger equity risk incentives are associated with greater tax risk and the magnitude of this effect is economically significant. Our results are robust across four measures of tax risk, but do not vary across several proxies for strength of corporate governance. We conclude that equity risk incentives are a significant determinant of corporate tax aggressiveness.

This paper investigates whether economies of scale exist for tax planning. In particular, do larger, more profitable, multinational corporations avoid more taxes than other firms, resulting in lower effective tax rates? While the empirical results indicate that, ceteris paribus, larger corporations have higher effective tax rates, firms with greater pre-tax income have lower effective tax rates. The negative relation between effective tax rates (ETRs) and pretax income is consistent with firms with greater pre-tax income having more incentives and resources to engage in tax planning.Consistent with multinational corporations being able to avoid income taxes that domestic-only companies cannot, I find that multinational corporations in general, and multinational corporations with more extensive foreign operations, have lower worldwide ETRs than other firms. Finally, in a sample of multinational corporations only, I find that higher levels of U.S. pre-tax income are associated with lower U.S. and foreign ETRs, while higher levels of foreign pre-tax income are associated with higher U.S. and foreign ETRs. Thus, large amounts of foreign income are associated with higher corporate tax burdens. Overall, I find substantial evidence of economies of scale to tax planning. La planification fiscale efficace (que l'on appelle aussi l'évitement fiscal et qui s'entend de toute méthode de planification fiscale employée par les contribuables pour réduire au minimum leur charge fiscale tout en respectant la loi) réduit la valeur actualisée de la charge fiscale et a généralement pour effet d'augmenter le taux de rendement après impôts dont bénéficient les investisseurs. Bien qu'il soit difficile de mesurer l'efficacité de la planification fiscale, les chercheurs qui se sont penchés sur la question (dont Mills, Erickson et Maydew, 1998 ; ainsi que Phillips, 2001) estiment que l'ETR est révélateur à cet égard. Dans la foulée de ces travaux, l'auteure assimile l'ETR au rapport entre les impôts exigibles de l'exercice et le bénéfice comptable avant impôts. Par conséquent, si deux entreprises affichent un bénéfice comptable avant impôts identique mais ont des impôts à payer différents, l'entreprise qui verse moins d'impôts aura un ETR plus faible et sera jugée plus efficace en matière de planification fiscale. KeywordsLe présent document élargit le champ des recherches comptables précédentes en conciliant les résultats des travaux antérieurs sur la relation entre les ETR et deux mesures d'économies d'échelle : la taille de l'entreprise et le bénéfice avant impôts. Mais l'auteure s'intéresse avant tout à la relation entre les ETR et une autre mesure des économies d'échelle : l'envergure des activités multinationales. Les ETR des sociétés multinationales présentent un intérêt particulier, certains observateurs estimant que « les occasions d'éviter l'impôt que leur offrent leurs investissements transfrontaliers peuvent être beaucoup plus grandes que celles qu'offrent des investissements strictement nationaux » (Leblang, 1998, p...

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