The impact of tax enforcement on corporate investment efficiency: evidence from the tax administration information system

Information technology is essential in tax enforcement. This study found that stronger tax enforcement after the tax administration information system reform improved corporate investment efficiency by reducing excessive investment expenditures. The effect is more significant under higher local government fiscal pressure, poorer external information environments, weaker external corporate governance, and stronger tax avoidance motivation. The main mechanism is based on the quality of the accounting information. This study enriches the literature on the economic consequences of tax enforcement and adds investment efficiency as an influential factor, which provides implications for international governments to use information technology to strengthen tax enforcement.     

Valuation of tax expense

As tax expense reflects value lost to taxes paid, it should be negatively associated with value, provided nontax, value-relevant information is controlled for. However, valuation regressions estimated in prior research—using contemporaneous tax expense and nontax variables—document substantial variation in the coefficients on tax expense, ranging from significant negative to significant positive values. We show this variation is (a) caused by the omission of expected future profitability, and (b) explained by many factors that cause variation in the correlations among included variables and omitted future profitability. Unfortunately, difficulties associated with separating the impact of individual factors hampers tax research investigating determinants of the value relevance of tax expense.     

财政层级改革、竞争效应与税收征管

以"省直管县"财政体制改革为准自然实验,运用双重差分模型,从企业实际税率的角度考量财政层级改革对县级政府税收征管行为的影响.结果显示:"省直管县"财政体制改革加剧了县级政府间的税收竞争,显著弱化了县级政府税收征管努力,降低了辖区内企业的实际税率,并且对于处于不同市场化水平和不同行业集中度的企业具有异质性影响.     

Private Equity and Local Public Finances

We study the economic impact of private equity (PE) investments on local governments, which are important corporate stakeholders. Examining over 11,000 deals and private firm data in Europe, we document that target firms' effective tax rates and total tax expenses decrease by 15% and 13% after PE deals. At the same time, target firms expand their capital expenditures and firm boundaries, but do not increase employment. Using administrative data on the public finances of German municipalities and exploiting the geographical and time-series variation in PE deals, we document that PE activity is negatively associated with local governments' tax revenues and spending. This result is likely driven by reduced tax payments of PE portfolio firms, accompanied by only modest positive spillovers of PE investments on regional economic growth. Collectively, our findings suggest that corporate tax efficiency serves as a cost-cutting channel in the PE sector and constrains the finances of local governments.     

政府财政激励、税收征管动机与企业盈余管理——以财政"省直管县"改革为自然实验的研究

政府对企业利润享有征税权,事实上是几乎所有企业的最大的中小股东,因此有动机对企业进行严格的税收征管,进而影响公司治理。本文以1998-2006年中国工业企业为样本,以财政“省直管县”改革为自然实验,从企业盈余管理的角度对此进行了考察。研究发现:财政“省直管县”改革能够显著抑制县辖区内企业的盈余管理行为,并且仅对具有征管权限的企业发挥作用;同时,当县级政府财政状况较差和税基较大时,财政“省直管县”对辖区内企业盈余管理行为的抑制作用更强,表明财政“省直管县”改革能够激励县级政府加强税收征管,进而改善辖区内企业盈余质量。更进一步地,本文还发现财政“省直管县”改革能够抑制企业逃税,提升县级政府财政收入。本文的研究不仅丰富了政府行为影响公司治理方面的文献,同时也为财政“省直管县”如何缓解县级政府财政困难提供了微观证据。     

The Nature of Corporate Income Tax Under a Full Imputation Tax Regime: A Test of Functional Fixation

This paper tests two competing hypotheses describing investors' behavior: the efficient market hypothesis and the functional fixation hypothesis. In particular, this study examines how Taiwan's stock market interprets the nature of corporate income tax after the 1998 Tax Reform, which switches from the classical tax system to the integrated tax system. This Tax Reform changes the nature of corporate income tax from a pure operating expense to an individual shareholder's tax credit, but current GAAP still treats it as an operating expense in the income statement. The empirical results show that Taiwan's stock market perceives the change in nature of corporate income tax and responds accordingly.     

Evidence of the effect of domicile on corporate average effective tax rates in the European Union

We estimate (worldwide) corporate average effective tax rates (ETRs) from financial statements for companies domiciled in European Union (EU) member states during 7 years from 1990 to 1996. Our objective is to compare the tax rate effectively experienced by each company with the corporate statutory tax rate (STR) in the EU country in which each company is domiciled. The difference between the corporate statutory tax rate and the financial statement-based corporate average effective tax rate provides information on the magnitude of tax incentives provided by governments within the EU. These tax incentives come on top of the directly observable differences in statutory tax rates between EU member states. We find (1) that the use of tax incentives, over and above differences in STRs, differs substantially between EU member states (corporate domiciles) and (2) that the provision of tax incentives does not have the effect of equalizing corporate ETRs between EU member states (corporate domiciles).     

税费替代:增值税减税、非税收入征管与企业投资

通过减税促进企业投资和提振宏观经济是近年来中国税收制度改革的重要目标,但减税政策的实际效果却存在争议。本文利用2009年增值税转型改革,研究了减税对地方政府税费收入和企业非税负担的影响,从税费替代的角度揭示非税负担变动如何影响企业固定资产投资。研究发现:(1)增值税转型在减税的同时提高了地方政府非税收入并加重了企业非税负担,地方财政收入受增值税转型冲击越大,企业非税负担上升越明显。(2)上述应主要体现在小型、微型和民营企业上,大中型、非民营企业的非税负担未发生明显变化。(3)非税负担上升会显著抑制小型、微型和民营企业的固定资产投资,促使小型微型和民营企业通过持有更多现金和减少流动性负债来应对税费负担不确定性。本文有助于理解减税政策对小型微型和民营企业非税负担的溢出效应及其影响,为通过减税降费促进投资和提振经济提供经验支撑。     

Changes in the value relevance of research and development expenses after IFRS adoption

We investigate whether the nature of differences between national GAAP and IFRS is associated with differential changes in the value relevance of R&D expenses after the adoption of IFRS across countries. Using a difference-in-differences study on a sample of public companies in nine countries that covers pre-IFRS and post-IFRS periods during 1997–2012, we find that the value relevance of R&D expenses declines after IFRS adoption in countries that previously mandated immediate expensing or allowed optional capitalization of R&D costs. On the contrary, there is no change in the value relevance of R&D expenses for countries that switched from the mandatory capitalization rule to IFRS. We also investigate the moderating effects of national institutions on the changes in the value relevance of R&D expenses after IFRS adoption. We find that in countries with stronger investor protection, the changes in the value relevance of R&D expenses are larger. In addition, changes in the value relevance of R&D expenses are smaller for countries whose national culture is characterized by higher uncertainty avoidance. Our findings highlight the importance of both accounting standards and national institutions in explaining the changes in the value relevance of accounting information after IFRS adoption.     

新所得税准则对上市公司盈利能力影响分析

新所得税准则要求企业运用资产负债表债务法进行所得税核算。资产负债表债务法通过比较资产负债的计税基础计算出应纳税暂时性差异和可抵扣暂时性差异,进而确认当期递延所得税,调整当期的所得税费用,所得税费用的调整会影响企业当期的净利润,进而影响股东的每股收益。因此,暂时性差异会影响企业的盈利能力。本文采用统计分析方法,分析新所得税准则对上市公司盈利能力的影响。     

The Market Valuation of Cash Dividends and the Tax Differential Theory of Dividend Policy: A Case Revisited

One of the most controversial areas in finance concerns the relevance or irrelevance of dividend policy. Survey results reported by researchers indicate that corporate chief financial officers believe that dividend policy does affect stock prices. One factor that could cause dividend policy to matter is possible tax effects. However, although many maintain that tax treatment would favor low payout, Miller and Scholes argue that tax policy is irrelevant. The latest change in the tax code, which removed the lower capital gains tax rate, provides a unique opportunity to examine the relevance of tax policy alone. This study revisits the Citizens Utilities case, which was used by Long and Poterba. We conclude that the market for Citizens Utilities shares indicates that tax policy does influence value.     

MEASURING CORPORATE TAX RATES AND TAX INCENTIVES: A NEW APPROACH

Taxes play an important but underemphasized role in the valuation of a company and its projects. For example, the authors estimate that the expected tax benefits from interest deductions by all publicly traded U.S. corporations were responsible for almost $1.4 trillion of their total market value of $12.7 trillion in 1991. In the case of RJR's 1989 leveraged buyout alone, the capitalized value of the interest tax shield amounted to several billion dollars (or about 25%) of the company's market value.
This article argues that, to maximize shareholder wealth, the corporate planning process should include a careful analysis of corporate tax incentives. Using several examples, the authors show how earnings variability and major provisions of the tax code interact to affect a company's expected marginal tax rate. After describing the complexities involved in properly calculating corporate tax rates, the article concludes by describing a simulation method the authors have developed to measure a company's effective marginal tax rate and, hence, its tax incentives to use more leverage (or some other means of reducing taxable income).
In furnishing a method for calculating marginal tax rates with greater accuracy, the authors also provide a clue to resolving the capital structure puzzle discussed in the roundtable at the head of this issue. In particular, their recent research corrects earlier studies in the finance literature by showing that when marginal tax rates are measured before financing (that is, based on income before interest expense is deducted), there is a positive relation between debt usage and tax rates.     

Tax competition and fiscal equalization under corporate income taxation

This paper challenges the view that tax base equalization by the so-called representative tax system (RTS) removes inefficient undertaxation in corporate tax competition. The innovation of the paper is that it focuses on a tax on corporate income, instead of the unit tax on capital considered in previous studies. We employ a tax competition model with fiscal equalization and show that the RTS fails to fully internalize pecuniary and fiscal externalities. As a consequence, the RTS yields inefficiently low tax rates in the Nash equilibrium of the tax competition game between governments. Tax revenue equalization performs even worse, but combined with equalization of private income it implements the efficient tax rates on corporate income.     

企业所得税制改革的几点思考

在统一内外资企业所得税的基础上建立规范的法人所得税制度是我国企业所得税制改革的必然趋势.统一规范法人所得税税基,在确定计税成本时应充分体现纳税人的费用补偿原则,并适当降低所得税税率,清理整顿税收优惠政策,为各种所有制形式的企业创造公平纳税环境,规范国家与企业的分配关系,简化税制.     

Development of accounting in Poland: Market efficiency and the value relevance of reported earnings

This paper outlines the evolution of the information environment surrounding the Warsaw Stock Exchange in Poland. Like other transition economies, Poland needed to develop accounting regulations to support privatization. We trace changes in financial reporting regulation from 1994, through the adoption of IFRS and corporate governance codes, to the crisis of 2007-2008. The effect of these developments is then evaluated empirically by testing the relevance of earnings of listed corporations from 1997 to 2008 to corporate value. We show that the stock exchange was weak-form efficient during this period and estimate regressions for value relevance of earnings to corporate value. We find positive evidence of such relevance but no improvement in the strength of the relationship over time.     

The Impact of the 1986 Tax Reform Act on Income Shifting from Corporate to Shareholder Tax Bases: Evidence from the Motor Carrier Industry

Using a sample of privately held C corporations and S corporations from the motor carrier industry during 1984–92, we assess the effect of the 1986 Tax Reform Act on the amount of corporate income shareholders of privately held C corporations shifted to their personal tax bases. We estimate that the C corporations shifted a mean of $130,587 taxable income each year to shareholders (representing 29% of their mean accounting earnings before income shifting) after the 1986 tax law change. The C corporations used deductible managerial compensation and rent expense, but not interest expense, to shift income to shareholders.     

Practitioners' perceptions of the importance of specific corporate tax knowledge of new hires working in tax

This study reports accounting practitioners' perceptions of the importance of new hires having certain tax knowledge normally addressed and developed in a corporate tax class. Variables related to the administration of a tax course are also examined.The results suggest that topics dealing with Subchapter S Corporations, determination of the corporate tax liability, and definition of the corporation are perceived as most important and should be covered in depth. Collapsible corporations and preferred stock bailouts are considered the least important topics.The survey results also are analyzed by firm size (large, medium, and small). Respondents from small firms place more importance on the accumulated earnings tax than the respondents from large firms. Respondents from large firms place more importance on reorganizations than respondents from medium or small firms.When asked about corporate tax course administration, respondents recommend the use of the Internal Revenue Code (IRC) and Regulations as a supplement to a standard textbook. They think it is important for any new hire to have at least one corporate tax course and be familiar with corporate tax forms. The only disagreement among the respondents from the different size firms is related to the number of courses students should complete. The respondents from the large firms indicate one course in corporate tax is not sufficient while the respondents from the medium and small firms indicate it is.The study also compares practitioners' recommendations concerning the amount of coverage for various corporate tax topics with the coverage of the topics in two corporate tax textbooks.These results have implications for accounting academicians who teach corporate tax. The results are useful in determining course coverage and in identifying topics that need additional attention as well as areas that need to be deemphasized or eliminated. The results also provide insight into the corporate tax course administration.     

The effects of analysts’ tax expense forecast accuracy on corporate tax avoidance: An international analysis

A spotlight has recently been cast on the role of analysts as monitors of corporate tax planning, but investigations beyond the US are rare. After extension to the international setting, I investigate whether the strength of investor protection impacts the relationship between analysts’ tax expense forecast accuracy and tax avoidance. Using a sample from 24 countries, I find that firms with high analysts’ tax expense forecast accuracy engage in lower levels of tax avoidance than firms with low forecast accuracy; this relationship is greater for firms in countries with weaker investor protection. These findings suggest that the extent of country-level investor protection substitutes for firm-level governance in constraining managerial incentives for tax avoidance.     

加拿大公司所得税制度与征管经验借鉴

加拿大的公司所得税制度体系完备,征管体系也较为合理,促进了经济的持续稳定发展。本文详细介绍了加拿大公司所得税制度及其征管体系,并提出我国在完善企业所得税制度时应借鉴其对公平与效率的兼顾以及加强税收征管的一些有效经验。     

The value relevance of taxes: International evidence on the proxy for profitability role of tax surprise

Despite evidence that tax surprise is incrementally value relevant, the literature has done little to broaden the investigation beyond the United States or examine circumstances that affect informativeness. After extending to the international setting, I examine the impact of tax enforcement. I report strong results of greater value relevance when tax enforcement is high and that the value relevance of tax surprise is mostly contained within its interaction with tax enforcement. These findings highlight the importance of tax enforcement in determining the information content of tax surprise and suggest that extant and future discussions should be broadened to include it.