How Well Do Compustat NOL Data Identify Firms with U.S. Tax Return Loss Carryovers?

2003 ◽  
Vol 25 (2) ◽  
pp. 1-17 ◽  
Author(s):  
Lillian F. Mills ◽  
Kaye J. Newberry ◽  
Garth F. Novack
Keyword(s):  
Return Loss ◽  
Tax Incentives ◽  
Matched Sample ◽  
Corporate Tax ◽  
Research Setting ◽  
Corporate Acquisitions ◽  
Misclassification Errors ◽  
Tax Returns ◽  
Foreign Operations ◽  
Tax Loss

Although Compustat net operating loss (NOL) data are an underlying component of most proxies of corporate tax incentives, there is little empirical evidence regarding how Compustat NOLs relate to firms' tax-loss positions per their U.S. tax returns. We use confidential U.S. tax return data for a sample of large corporations over the period 1981–1995 to compute firms' U.S. tax-loss carryovers and construct a matched sample with Compustat data. We then evaluate how well Compustat NOL data works as an indicator of firms' U.S. tax-loss positions, identify sources of misclassification errors, and investigate the effectiveness of using additional Compustat data screens. We find that screening for U.S. current income tax or total pretax income successfully reduces certain types of misclassification errors. We conclude that care should be used in constructing U.S. tax-loss proxies, particularly when the research setting involves firms with foreign operations or corporate acquisitions activity.

The Costs of Corporate Tax Complexity

2021 ◽  
Vol 13 (2) ◽  
pp. 467-500
Author(s):  
Eric Zwick
Keyword(s):  
Small Firms ◽  
Cost Benefit Analysis ◽  
Cost Benefit ◽  
Tax Rates ◽  
Corporate Tax ◽  
Corporate Behavior ◽  
Research Designs ◽  
Tax Returns ◽  
Code Complexity ◽  
Tax Loss

Does tax code complexity alter corporate behavior? We investigate this question by studying the decision to claim refunds for tax losses. In a sample of 1.2 million observations from the population of corporate tax returns, only 37 percent of eligible firms claim their refund. A simple cost-benefit analysis of the tax loss choice cannot explain low take-up, motivating an exploration of how complexity alters this calculation. Research designs exploiting tax preparer switches, deaths, and relocations show that sophisticated preparers increase claim rates for small firms. Imperfect take-up has implications for measuring marginal tax rates and for the design of fiscal policy. (JEL D22, D61, E62, H25, K34)

CEO Compensation and Acquired and Acquiring Companies in Large Corporate Acquisitions

GIS Business ◽  
2016 ◽  
Vol 11 (5) ◽  
pp. 01-13
Author(s):  
Simon Yang
Keyword(s):  
Firm Performance ◽  
Executive Compensation ◽  
Ceo Compensation ◽  
Relative Sensitivity ◽  
Matched Sample ◽  
Executive Pay ◽  
Corporate Acquisitions ◽  
Acquiring Firms ◽  
Managerial Power ◽  
To Receive

This paper examines the relative sensitivity of CEO compensation of both acquiring and acquired firms in the top 30 U.S. largest corporate acquisitions in each year for the period of 2003 to 2012. We find that total compensation and bonus granted to executive compensation for acquired companies, not acquiring companies, are significantly related to the amount of acquisition deal even after the size and firm performance are controlled for. Both acquiring and acquired CEOs are found to make the significantly higher compensation than the matched sample firms in the same industry and calendar year. We also find that executives with higher managerial power, as measured by a lower salary-based compensation mix, prior to a corporate acquisition are more likely to receive a higher executive pay in the year of acquisition. The association between executive compensation and managerial power seems to be stronger for acquired firms than for acquiring firms in corporate acquisition. Overall, our findings suggest that corporate acquisition has higher impacts on executive compensation for acquired firm CEOs than for acquiring firm CEOs.

Implicit Taxes Amid Race to the Bottom in a Global Tax Game

2020 ◽  
Vol 27 (2) ◽  
pp. 42
Author(s):  
Igor Semenenko ◽  
Junwook Yoo ◽  
Parporn Akathaporn
Keyword(s):  
Capital Mobility ◽  
Tax Rates ◽  
Corporate Tax ◽  
Firm Level ◽  
Race To The Bottom ◽  
Tax Subsidy ◽  
Tax Subsidies ◽  
Level Data ◽  
Tax Returns ◽  
Tax Hypothesis

Growing tax competition among national governments in the presence of capital mobility distorts equilibrium in the international corporate tax market. This paper is related to the literature that examines impact of international tax policies on corporate accounting statements. Employing international firm-level data, this study revisits the race-to-the-bottom hypothesis and documents that tax exemptions lowering effective tax rates relative to statutory rates increase pre-tax returns. This finding directly contradicts the implicit tax hypothesis documented by Wilkie (1992), who provided empirical evidence on inverse relationship between pre-tax return and tax subsidy. We also find evidences that relative importance of permanent versus timing component depends on the geography and that decline in corporate tax rates reduces impact of tax subsidies on profitability. Our findings suggest that tax subsidies play a different role than in 1968-1985, which was examined by Wilkie (1992). These results are consistent with the race-to-the-bottom hypothesis and income shifting explanation

Reducing Errors in Measures of Corporate Tax Incentives

2002 ◽  
Author(s):  
Lillian F. Mills ◽  
Kaye J. Newberry ◽  
Garth F. Novack
Keyword(s):  
Tax Incentives ◽  
Corporate Tax

scholarly journals Covid-19 and corporate tax avoidance: Measuring long-run tax burdens as an alternative bailout test

2021 ◽  
Vol 4 (3) ◽  
pp. 216-244
Author(s):  
Subagio Efendi
Keyword(s):  
Financial Aid ◽  
Income Tax ◽  
Tax Avoidance ◽  
Tax Compliance ◽  
Total Sample ◽  
Ordinary Least Squares ◽  
Corporate Tax ◽  
Long Run ◽  
Tax Returns ◽  
Avoidance Measures

This study fills the gap in the tax authority’s Covid-19 financial aid verifications by examining, and nominating, Long-run ETR (Dyreng et al., 2008) as the better corporate tax avoidance measure in excluding tax evader firms from the broad stimulus programs. Analysing confidential tax returns of 4,752 largest firms (32,120 firm-years) in Indonesia over 2009 to 2017 periods, this study found 18.12 percent of total sample firms is able to retain its Long-run ETR below 10 percent, which indicates continual tax avoidance activities by these firms during observation periods. Moreover, applying univariate and multivariate Ordinary Least Squares and Panel Data estimations, this study reveals, relative to other tax avoidance measures, Lagged Cash ETR (Lisowsky, 2010; Lisowsky et al., 2013) present the most consistent reliability in predicting long-run income tax burdens. Thus, this study asserts, in the conditions of computing Long-run ETR is costly and impractical (i.e. because of data unavailability), tax authority and policymakers can directly analyse firms’ Lagged Cash ETR to gauge their long-run income tax burdens and tax compliance behaviours prior the economic downturn. 

Voluntary Disclosure Responses to Mandated Disclosure: Evidence from Australian Corporate Tax Transparency

2021 ◽  
Author(s):  
Allison Kays
Keyword(s):  
Voluntary Disclosure ◽  
Tax Planning ◽  
Public Disclosure ◽  
Corporate Tax ◽  
Public Firms ◽  
Additional Information ◽  
Proprietary Costs ◽  
Tax Returns ◽  
Disclosure Responses ◽  
Reputational Costs

In order to deter aggressive tax planning, the Australian government mandated public disclosure of three line items from large corporations' tax returns. However, there is no evidence that the mandated disclosure led public firms to pay more taxes (Hoopes, Robinson, and Slemrod 2018). Instead, I find that firms strategically offset expected reputational costs by voluntarily issuing supplemental information. Specifically, when managers expect new reputational costs from the mandated tax return disclosure (wherein the disclosure reveals an unexpectedly low tax liability) and low proprietary costs from a supplemental voluntary disclosure (wherein the firm discloses its nonaggressive tax planning), firms are likely to voluntarily disclose information that both preempts and supplements the government's mandatory disclosure. Thus, when mandatory disclosures are incomplete, firms will voluntarily issue additional information to remain in control of their disclosure environments.

The Efficiency of Corporate Tax Incentives in Developing Countries Based on Foreign Direct Investments

2020 ◽  
pp. 228-258
Author(s):  
Simla Güzel
Keyword(s):  
Developing Countries ◽  
Tax Incentives ◽  
Local Economy ◽  
Foreign Direct Investments ◽  
Corporate Tax ◽  
Quarter Century ◽  
Organizational Infrastructure ◽  
Red Tape ◽  
Market Opportunities ◽  
Economic Development Strategies

During the last quarter century, a remarkable global growth was experienced in Foreign Direct Investment (FDI), especially the developing countries, considered FDIs as an important factor in overall economic development strategies. The developing countries aim to attract foreign capital to strengthen their local economy, increase market opportunities, and provide better services to the society. For this purpose, these nations implement various types of tax incentives. Although there are several studies on the effectiveness of tax incentives in FDI, the issue has not been tackled with respect to developing countries. The present study scrutinized the effectiveness of corporate tax incentives in developing countries based on FDI. In conclusion, it could be suggested that tax incentives may be effective in increasing FDI; however, in this group of countries with low level of investments and complex laws in taxation and other fields and could not cope with innovations, red tape and poor governance, it is also important to develop the organizational infrastructure for investments.

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