Personally Tax Aggressive Managers and Firm Level Tax Avoidance

This paper investigates whether managers that have a propensity for personal tax aggressiveness are associated with tax avoidance at the firm level. Motivated by Dhaliwal, Erickson, and Heitzman (2009) and Hanlon and Heitzman (2009), I construct a measure of personally tax aggressive ("aggressive") managers and determine whether corporate tax avoidance activities increase in their presence. The results of my study indicate that aggressive managers are associated with firm-level tax avoidance. The neoclassical view would suggest that aggressive managers' tax expertise could benefit shareholders through lower tax payments. Since aggressive managers extract their personal tax savings from shareholders, non-tax agency costs potentially increase in their presence. This has implications for the association between aggressive managers and firm value. Using the framework established through the agency view of tax avoidance (Desai and Dharmapala, 2008) I find that on average the presence of aggressive managers is associated with increased firm value. However, consistent with recent research, governance is an important moderating factor whereby firm value in the presence of aggressive managers tends to increase only for relatively better-governed firms

Implicit taxes of u.S. domestic and multinational firms during the past quarter century

Dyreng et al. (2017) find that the effective tax rates for both foreign and domestic firms have been steadily decreasing during recent decades and that multinational firms (MNEs) do not have a tax advantage relative to domestic firms. This paper extends this research and examines implicit taxes for MNEs relative to domestic firms. We find evidence that implicit taxes are approximately 32 percent lower for MNEs. We exploit differences in the exposure to various market frictions to help explain how MNEs could have lower implicit taxes than domestic firms. We find that MNEs face less competition, operate in countries with higher unemployment rates, use patents more frequently, tend to have more global supply chains, and are more vertically integrated when compared to domestic firms. We also find that firms with relatively higher product concentration and relatively lower product similarity exhibit approximately 35 percent lower implicit taxes

The association between auditor provided tax planning and tax compliance services and tax avoidance and tax risk

This study examines associations between auditor provided tax compliance and tax planning services and tax avoidance and tax risk. Collectively, our results suggest that companies paying their auditors for tax planning advice are more effective tax planners (in terms of higher tax avoidance and lower tax risk) than firms that do not engage their auditor for tax work. Our tax avoidance results are more pronounced for clients of auditors with more tax expertise and longer tenure, as well as for firms with higher tax and operational complexity. We also find that our tax avoidance results hold only when firms also engage their auditors for tax compliance work, which is consistent with auditors seeking to minimize reputation threats. Our study’s unique hand-collected panel dataset provides a more precise and nuanced perspective on the role auditors play in tax outcomes