The Tax Complexity Index – A Survey-Based Country Measure of Tax Code and Framework Complexity

Hoppe, Thomas; Schanz, Deborah; Sturm, Susann; Sureth-Sloane, Caren

doi:10.1080/09638180.2021.1951316

Cited by 21 publications

(18 citation statements)

References 85 publications

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“…I think that they will get even more aggressive in the future” (Tax Director, Interview 2). Besides a general “increase in audit intensity” (Tax Director, Interview 6), regulatory pressure can also arise from regulatory vagueness, increasing tax code complexity (Hoppe et al 2021), and tax authorities' use of new (automated) technologies in audits.…”

Section: Resultsmentioning

confidence: 99%

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Defining and Managing Corporate Tax Risk: Perceptions of Tax Risk Experts*

Brühne

Schanz

2022

Contemporary Accting Res

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We examine the "black box" of corporate tax risk management by providing unique insights into practitioners' tax risk perceptions, tax risk management practices, and influences leading to variation in tax risk management practices across firms. Opening this black box is important as tax risk has become an increasingly relevant aspect in corporate tax practice-little is yet known about how firms define and manage tax-related risks. We perform our analysis based on 33 expert interviews, which we conducted with 42 tax risk experts. The first important finding from our interviews is that tax risk is a multifaceted and contextdependent construct, consisting of six tax risk components: financial, reputational, compliance, political, tax process, and personal liability risk. Furthermore, we find that perceived tax risk varies substantially between corporate insiders and corporate outsiders. Our interview insights further reveal that firms' most frequently used tax risk management practices relate to some form of tax communication. The tax departments' rationale for using tax communication as a key tax risk management practice is to protect the firm-in particular, the CFO-from three types of pressure: public pressure, peer pressure, and regulatory pressure. Our analysis has important implications for future studies. First, our insights reveal that several tax risk components are not sufficiently covered by common tax risk measures used by the archival literature. Second, we find that communication has a key role in managing tax risk. This deviates from the purely supportive role that extant risk management frameworks have assigned to communication.

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Section: Resultsmentioning

confidence: 99%

“…2 2 Thus, the terms used throughout this paper describe the practitioners' perception. Other studies follow a similar approach (Hoppe et al 2021, 5–6). …”

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confidence: 98%

Defining and Managing Corporate Tax Risk: Perceptions of Tax Risk Experts*

Brühne

Schanz

2022

Contemporary Accting Res

Self Cite

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“…, 2022), GDP_G (measured as gross domestic product growth) and LNGDP (measured as the natural logarithm of gross domestic product per capita) are included in Equation (3). We also include the tax complexity index ( TCI ) to control for the country-level tax code and tax framework complexity (Hoppe et al. , 2021).…”

Section: Methodsmentioning

confidence: 99%

Book-tax conformity and the demand for auditor-provided tax services: European evidence

Sun

Habib

Yao

2023

JAL

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PurposeThis study aims to examine the impact of different levels of required book-tax conformity (BTC) on audit clients' demand for auditor-provided tax services (APTS). In addition, the authors also investigate the effects of the European Union (EU) Regulation (2014).Design/methodology/approachThis study utilizes a sample of listed companies from 10 EU countries between 2010 and 2019. The final sample consists of 16,049 firm-year observations from 2,515 unique firms, and the authors use both probit and ordinary least square (OLS) regression models in this study.FindingsThe main finding of this paper is that companies listed in countries with a higher level of BTC are less likely to purchase tax services from incumbent auditors and pay fewer auditor-provided tax service fees. Results from further analyses confirm that firms substantially reduced their purchase of APTS after the EU Regulation (2014) was implemented, but these reduced purchases were found to be more pronounced for firms located in countries with low BTC.Originality/valueThis study advances the understanding of the determinants of APTS and the consequences of BTC. Specifically, the authors report that variation in a country-specific feature (i.e. BTC) also affects firms' decision to purchase APTS. Moreover, this paper provides some preliminary evidence of the new regulation and contributes to the literature on APTS regulation. The findings of this study have important policy implications for regulators and are also relevant for various capital market participants.

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“…16 To control for country characteristics, we include the GDP per capita 17 (DeBacker et al 2015a;Huizinga and Laeven 2008), a dummy if the home country has a worldwide tax system 18 (Atwood et al 2012;Kanagaretnam et al 2018), a measure for the tax complexity of the countries (Richardson 2006;Thomsen and Watrin 2018), SYSTEM 19 to control for cross-country institutional factors (Atwood et al 2010(Atwood et al , 2012 and TAXREV_PERSTAFF, i.e., the corporate tax revenue divided by the fulltime permanent employees within the revenue administration as a proxy for the tax enforcement 20 of a country. Finally, we use the tax complexity index developed by Hoppe et al (2021) for 2016, 21 which measures the complexity of the countries' corporate income tax system. The index covers the complexity of the tax code as well as the complexity of the tax framework.…”

Section: Control Variablesmentioning

confidence: 99%

Perceived tax audit aggressiveness, tax control frameworks and tax planning: an empirical analysis

Blaufus¹,

Reineke²,

Trenn³

2022

J Bus Econ

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This paper examines whether a perceived increase in tax audit aggressiveness is associated with lower tax planning effort and a higher quality of internal tax control frameworks. Using survey data on corporate tax functions from approximately 200 firms from different countries, contrary to expectations, we find that neither internal nor external resources devoted to tax planning are lower for firms that perceive an increase in tax audit aggressiveness. Nevertheless, for these firms, we find a positive association with the quality of their tax control framework and their investments in the reputation management and communication skills of their tax department staff. In line with this, we find that an increase in perceived audit aggressiveness is directly (indirectly) associated with an increase in resources allocated to the tax function “controversy and audit defense” (“risk management and governance”). In addition, our results show a positive relationship between the quality of the tax control framework and the need for comprehensive improvements in human capital and internal processes, suggesting that the tax control framework affects the firms' perceptions of their tax capabilities and drives organizational changes. Overall, these findings are in line with the rationale that an increase in audit aggressiveness changes the costs of compliance errors such that firms improve the quality of their tax control framework to reduce future errors. In contrast, it remains unclear whether tax audit aggressiveness actually changes tax planning behavior, as we find no negative association with the firms' investment in tax planning.

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The Tax Complexity Index – A Survey-Based Country Measure of Tax Code and Framework Complexity

Cited by 21 publications

References 85 publications

Defining and Managing Corporate Tax Risk: Perceptions of Tax Risk Experts*

Defining and Managing Corporate Tax Risk: Perceptions of Tax Risk Experts*

Book-tax conformity and the demand for auditor-provided tax services: European evidence

Perceived tax audit aggressiveness, tax control frameworks and tax planning: an empirical analysis

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