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Tax Overpayments, Tax Evasion, and Book-Tax Differences

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Author Info
Laszlo Goerke ()

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Abstract

A strictly risk-averse manager makes joint decisions on a firm's tax payments and book profit declarations according to accounting standards. It is analysed how the incentives to overpay or evade taxes and to inflate book profits are influenced by (1) the composition of the manager's remuneration, (2) the ability to control the manager's actions, (3) the costs of making untruthful profit declarations, and (4) the tax rate. If the firm's owner or the government takes into account these effects when pursuing his own objectives, the changes in tax payments and book profit declarations become theoretically more ambiguous.

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Publisher Info
Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 2212.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2212

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Related research
Keywords: executive compensation financial accounting tax evasion

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References listed on IDEAS
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  1. Desai, Mihir A. & Dharmapala, Dhammika, 2006. "Corporate tax avoidance and high-powered incentives," Journal of Financial Economics, Elsevier, vol. 79(1), pages 145-179, January. [Downloadable!] (restricted)
    Other versions:
  2. Crocker, Keith J. & Slemrod, Joel, 2005. "Corporate tax evasion with agency costs," Journal of Public Economics, Elsevier, vol. 89(9-10), pages 1593-1610, September. [Downloadable!] (restricted)
    Other versions:
  3. Mihir A. Desai, 2005. "The Degradation of Reported Corporate Profits," Journal of Economic Perspectives, American Economic Association, vol. 19(4), pages 171-192, Fall. [Downloadable!] (restricted)
  4. Goldman, Eitan & Slezak, Steve L., 2006. "An equilibrium model of incentive contracts in the presence of information manipulation," Journal of Financial Economics, Elsevier, vol. 80(3), pages 603-626, June. [Downloadable!] (restricted)
  5. Shackelford, Douglas A. & Shevlin, Terry, 2001. "Empirical tax research in accounting," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 321-387, September. [Downloadable!] (restricted)
  6. Hanlon, Michelle & Laplante, Stacie Kelley & Shevlin, Terry, 2005. "Evidence for the Possible Information Loss of Conforming Book Income and Taxable Income," Journal of Law & Economics, University of Chicago Press, vol. 48(2), pages 407-42, October.
  7. Douglas A. Shackelford & Joel Slemrod & James M. Sallee, 2007. "A Unifying Model of How the Tax System and Generally Accepted Accounting Principles Affect Corporate Behavior," NBER Working Papers 12873, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Desai, Mihir A. & Dyck, Alexander & Zingales, Luigi, 2007. "Theft and taxes," Journal of Financial Economics, Elsevier, vol. 84(3), pages 591-623, June. [Downloadable!] (restricted)
  9. Allingham, Michael G. & Sandmo, Agnar, 1972. "Income tax evasion: a theoretical analysis," Journal of Public Economics, Elsevier, vol. 1(3-4), pages 323-338, November. [Downloadable!] (restricted)
  10. Murphy, Kevin J., 1999. "Executive compensation," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 38, pages 2485-2563 Elsevier. [Downloadable!] (restricted)
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This page was last updated on 2008-9-22.

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