Keywords
tax amnesty, tax forgiveness, tax avoidance, state taxation, effective tax rate
Abstract
This study uses state tax amnesties to examine how firms respond to forgiveness—particularly repeated forgiveness—by a taxing authority. We posit that tax forgiveness programs alter taxpayer perceptions of the probability of detection by enforcers or the probability of future forgiveness programs, either of which could affect future tax aggressiveness. We find that firms headquartered in an amnesty-granting state increase state income tax aggressiveness following the first instance of tax amnesty, relative to control firms in other states. Moreover, we find evidence that tax aggressiveness incrementally increases with each additional repetition of a tax amnesty. Finally, we find that the effect of amnesties on tax aggressiveness is more prominent for small firms, which face less scrutiny and for which the tax aggressiveness measures are less confounded. Our findings suggest that repeated programs of tax forgiveness have increasingly negative implications for corporate tax collections.
Original Publication Citation
“An Examination of Firms’ Responses to Tax Forgiveness” (with Terry Shevlin and Brady Williams). Review of Accounting Studies (2017) 22:577-607.
BYU ScholarsArchive Citation
Shevlin, Terry; Thornock, Jacob; and Williams, Braden, "An Examination of Firms’ Responses to Tax Forgiveness" (2017). Faculty Publications. 8583.
https://scholarsarchive.byu.edu/facpub/8583
Document Type
Peer-Reviewed Article
Publication Date
2017
Publisher
Review of Accounting Studies
Language
English
College
Marriott School of Business
Department
Accountancy
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