Tax planning and payment timing

The purpose of this paper is to find out about the arbitration between the payment of tax due and the reinvestment of this amount and to look for the timing in which the reinvestment of tax due is more profitable than tax payment. This research is made in connection between accounting and taxation context and tax system feature. To answer to our question we use the vector auto regression (VAR) method, which will enable us to analyse the response functions that determine the time at which the profitability of the investment duties to pay will become higher than the penalties. We use a sample of 37 firms listed over 11 years (2000 to 2010). The result shows that managers are not interested to make tax payments within two years because the return of reinvestments will be negative because of the impact of penalties incurred by the legal system and the importance of tax revenues in the economy and the short-term exploitation. This study can also be the object of replications in other contexts. The findings of this paper contribute to the sparse literature on tax management and could be improved by tax optimisation considerations.