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Lost in Translation: Detecting Tax Shelter Activity in Financial Statements

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  • McGill, Gary A.
  • Outslay, Edmund

Abstract

Whether financial statements of public U.S. corporations provide sufficient information to the public to determine a corporation's tax payment to the U.S. Treasury and its involvement in "tax shelter" transactions has been much debated since the well publicized collapses of Enron Corporation and WorldCom, Inc. In this paper, we use specific examples to demonstrate how "income tax note" data can be analyzed to answer these two questions and, in so doing, point out the limitations of using financial accounting information to address tax–related issues. We conclude with suggestions to increase the transparency of a corporation's tax activities through enhanced disclosure.

Suggested Citation

  • McGill, Gary A. & Outslay, Edmund, 2004. "Lost in Translation: Detecting Tax Shelter Activity in Financial Statements," National Tax Journal, National Tax Association;National Tax Journal, vol. 57(3), pages 739-756, September.
    • Handle: RePEc:ntj:journl:v:57:y:2004:i:3:p:739-56
    DOI: 10.17310/ntj.2004.3.13
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    References listed on IDEAS

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    1. Lenter, David & Slemrod, Joel & Shackelford, Douglas A., 2003. "Public Disclosure of Corporate Tax Return Information: Accounting, Economics, and Legal Perspectives," National Tax Journal, National Tax Association;National Tax Journal, vol. 56(4), pages 803-830, December.
    2. Boynton, Charles & Mills, Lillian, 2004. "The Evolving Schedule M–3: A New Era of Corporate Show and Tell?," National Tax Journal, National Tax Association;National Tax Journal, vol. 57(3), pages 757-772, September.
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