Aggressive Tax Strategies and Corporate Tax Governance: an Institutional Approach

This paper deals with the impact of tax-aggressive strategies on corporate governance by adopting an agency perspective of the firm and discusses how certain corporate tax governance measures may limit these kinds of managerial actions. The paper defines the regulative concept of effective tax planning as a tax strategy that minimizes not only explicit taxes, but also implicit taxes and non-tax costs, focusing on the agency problems emerging between shareholders and tax managers. This key concept is then used to identify what kind of tax-aggressive strategies pose relevant policy issues and to highlight important issues, such as: why and to what extent do managers pursue aggressive tax strategies, why are these strategies used in large companies, do these strategies advance shareholder value, and how can tax savings obtained through these strategies be measured? The conclusion os that aggressive managerial tax behaviour requires counterbalancing policies which are not limited to the traditional anti-avoidance rules but also include the tools of corporate tax governance; such as risk and metarisk management, disclosure rules, regulation of tax advisors, reporting