Theft and Taxes

Taxes, Theft, and Firm Performance

“…The legal schemes (tax avoidance) often involve the use of external or internal off‐shore affiliated companies in areas with low tax regimes. Desai, Dyck, and Zinglales (, p. 603) provide as an example Sibneft, the fifth largest Russian oil company: “Sibneft's production subsidiary was selling oil at just $2.20/barrel, considerably below the average export price (net of export costs and excise taxes) of $13.50 and also well below the average domestic price (net of taxes) of $7.20/barrel. Unsurprisingly, company financial reports revealed an effective corporate tax rate of just 2.6%, far below the statutory rate of 30%.” In 2001, Sibneft decreased its income tax by 10 billion rubles ($330 million) by selling oil through several traders registered in low‐tax zones in Chukotka and Kalmykia .…”

“…Few recent studies provide empirical evidence on this topic. One exception is Desai, Dyck, and Zingales (), who analyze the interaction among corporate taxes, tax avoidance, corporate governance, and corporate market value. The authors provide evidence that increased tax enforcement can increase (rather than decrease) a company's market value.…”

“…Finally, I show that stricter tax enforcement is positively related to firm performance. Following Desai, Dyck, and Zingales (), I provide comprehensive empirical evidence on why tax evasion may be negatively related to firm value.…”

Tax Avoidance, Near‐Future Earnings, and Resource Availability

“…Although the incentives that entice firms to plan for tax avoidance are still not fully understood (Hanlon and Heitzman ), the incentives and determinants of tax avoidance have been examined in a number of prior papers. Tax avoidance activities are carried out to lower GAAP ETRs (Gupta and Newberry ; Rego ), to satisfy compensation incentives (Phillips ; Desai and Dharmapala ; Desai et al ), and to escalate cash availability (Slemrod ; Rego ; Desai and Dharmapala ; Ayers et al ; Edwards et al ). These are examples that explain why firms choose to engage in aggressive tax planning at the risk of being audited by tax authorities, which may cause costs other than cash taxes paid (Slemrod ; Rego ; Desai and Dharmapala ; Brondolo ; Ayers et al ; Campello et al , ; Edwards et al ).…”

Corporate governance and returns to emerging economy firm acquisitions in tax havens: An empirical test on Indian firms

“…At the country level, formal rules (laws and regulations) in the country that protect investors, and the enforcement of these rules, can affect the alignment of interests and behaviors of managers and controlling stockholders with the interests of other stockholders (La Porta, Lopez‐de‐Silanes, Shleifer, & Vishny, ; North, ). Because formal rules on investor protection and their enforcement vary across countries, the efficacy of corporate governance will vary systematically across countries (Desai, Dyck, & Zingales, ; La Porta et al, ). In addition, because firms within the same country can vary in firm specific features that align the interests and behaviors of managers and controlling stockholders with the interests of other stockholders, the efficacy of corporate governance can also vary across firms within the same country (Aguilera & Crespi‐Cladera, ; Desai & Dharmapala, , ; Gompers, Ishii, & Metrick, ).…”