When Do Firms Highlight Their Effective Tax Rate?

Flagmeier, Vanessa; Mueller, Jens; Sureth-Sloane, Caren

doi:10.2139/ssrn.3693374

Cited by 3 publications

(3 citation statements)

References 77 publications

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“…Demeré et al (2019) provide empirical evidence that firms smooth their GAAP ETRs. Consistently, Flagmeier et al (2020) find that firms strategically disclose information on their GAAP ETR more visibly if their ETR is favorable from an investor's perspective (low or close to the average ratio for firms of the same industry or size group). Overall, these findings indicate that firms actively manage investors' perception in their tax disclosure strategy.…”

Section: Management Of Tax Perception and Its Impact On Stakeholdersmentioning

confidence: 70%

Tax Misperception and its Effects on Decision Making – Literature Review and Behavioral Taxpayer Response Model

Blaufus

Chirvi

Huber

et al. 2020

European Accounting Review

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Previous accounting research shows that taxes affect decision making by individuals and firms. Most studies assume that agents have an accurate perception regarding their tax burden. However, there is a growing body of literature analyzing whether taxes are indeed perceived correctly. We review 128 studies on the measurement of tax misperception and its behavioral implications. The review reveals that many taxpayers have substantial tax misperceptions that lead to biased decision making. We develop a Behavioral Taxpayer Response Model on the impact of provided tax information on tax perception. Besides individual traits, characteristics of the tax information and the decision environment determine the extent of tax misperception. We discuss opportunities for future research and methodological limitations. While there is much evidence on tax misperception at the individual level, we hardly find any research at the firm level. Little is known about the real effects of managers' tax misperception and on how tax information is strategically managed to impact stakeholders. This research gap is surprising as a large part of the accounting literature analyzes decision making and disclosure of firms. We recommend a mixed-method approach combining experiments, surveys, and archival data analyses to improve the knowledge on tax misperception and its consequences.

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Section: Management Of Tax Perception and Its Impact On Stakeholdersmentioning

confidence: 70%

Tax Misperception and its Effects on Decision Making – Literature Review and Behavioral Taxpayer Response Model

Blaufus

Chirvi

Huber

et al. 2020

European Accounting Review

Self Cite

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“…The study corroborated the findings of previous studies that the exempt income accretion strategy of the identified banks was used as a qualifying tax shelter by companies. In Flagmeier et al ’s (2020) study on factors guiding disclosure behavior on ETRs by firms, the findings showed that firms tend to highlight ETRs when they are favorable and seldom avoid disclosures when ETR figures go north. Some errors underlie this assumption, considering that ETRs disclosures and their reconciliation to the statutory tax rate in financial statement footnotes is guided by the requirements of International Accounting Standard 12 on income taxes (Section 8, Subsection 1) and ASC 740 for companies reporting under the US GAAP.…”

Section: Literature Reviewmentioning

confidence: 98%

“…Other researchers examined the sources of declining ETRs for select groups of multinational and domestic firms using both cross-sectional and time-trend data on the ETR effects of each element of the reconciliation items (Drake et al , 2017; Flagmeier et al , 2020; McGill and Outslay, 2004; Nwachukwu and Mohammed, 2012). Drake et al (2017) highlighted the frequency, tax rate impact and the magnitude of the absolute dollar benefit of each reconciliation item across the spectrum of the multinational enterprises and domestic firms studied.…”

Section: Literature Reviewmentioning

confidence: 99%

Tax avoidance in banking institutions: an analysis of the top seven Nigerian banks

Folorunso

Lokanan

2022

JFC

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Purpose The purpose of this paper is to review the quantum and magnitude of tax avoidance in Nigeria's top seven banks by using recognized tax avoidance proxies of the Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standard (IFRS) effective tax rate (ETR) and book-tax gap analysis for the appraisal. Design/methodology/approach Data for the paper came from the annual reports of the banks between 2011 and 2019. The individual bank’s tax data was analyzed for trends and then consolidated to establish the average percentages and the exact amount of the tax the banks evaded each year and cumulatively over the review period. The data were then matched with analytics of the drivers of tax avoidance in the reconciliation statement to highlight essential tax planning items and strategies being exploited by each bank in the pursuit of aggressive tax avoidance behavior. Findings F-test comparing the aggregate means (all banks) for tax evasion proxies of ETR and the book-tax gap was conducted at a 95% confidence interval. The results of this paper indicate no significant difference between the means obtained, thus affirming that the same pattern of tax evasion was consistent among the banks for the years reviewed. Originality/value The findings of this paper highlight the tax avoidance behavior of the referenced banks, identify weaknesses in the corporate tax planning policy pursued and serve to alert policymakers of the need to strengthen the laws and block loopholes that provide rooms for unrestrained tax avoidance behavior in the banking sector.

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Tax Misperception and Its Effects on Decision Making – a Literature Review

Blaufus

Chirvi²,

Huber³

et al. 2020

SSRN Journal

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Previous accounting research shows that taxes affect decision making by individuals and firms. Most studies assume that agents have accurate perception regarding their tax burden. However, there is a growing body of literature analyzing whether taxes are indeed perceived correctly. We review 124 studies on the measurement of tax misperception and its behavioral implications. The review reveals that many taxpayers have substantial tax misperceptions that lead to biased decision making. We develop a Behavioral Taxpayer Response Model on the impact of provided tax information on tax perception. Besides individual traits, characteristics of the tax information and the decision environment determine the extent of tax misperception. We discuss opportunities for future research and methodological limitations. While there is much evidence on tax misperception at the individual level, we hardly find any research at the firm level. Little is known about the real effects of managers' tax misperception and on how tax information is strategically managed to impact stakeholders. This research gap is surprising as a large part of the accounting literature analyzes decision making and disclosure of firms. We recommend a mixed-method approach combining experiments, surveys, and archival data analyses to improve the knowledge on tax misperception and its consequences.

show abstract

When Do Firms Highlight Their Effective Tax Rate?

Cited by 3 publications

References 77 publications

Tax Misperception and its Effects on Decision Making – Literature Review and Behavioral Taxpayer Response Model

Tax Misperception and its Effects on Decision Making – Literature Review and Behavioral Taxpayer Response Model

Tax avoidance in banking institutions: an analysis of the top seven Nigerian banks

Tax Misperception and Its Effects on Decision Making – a Literature Review

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