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Tax Overpayments, Tax Evasion, and Book-Tax Differences

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  • LASZLO GOERKE

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 analyzed 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 take into account these effects when pursuing their own objectives, the changes in tax payments and book profit declarations become theoretically more ambiguous. Copyright © 2008 Wiley Periodicals, Inc..

Suggested Citation

  • Laszlo Goerke, 2008. "Tax Overpayments, Tax Evasion, and Book-Tax Differences," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(4), pages 643-671, August.
  • Handle: RePEc:bla:jpbect:v:10:y:2008:i:4:p:643-671
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    References listed on IDEAS

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    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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