Abstract

http://ssrn.com/abstract=1668628
 
 

References (119)



 
 

Citations (6)



 


 



Do IRS Audits Deter Corporate Tax Avoidance?


Jeffrey L. Hoopes


Ohio State University (OSU) - Department of Accounting & Management Information Systems

Devan Mescall


University of Saskatchewan

Jeffrey Pittman


Memorial University of Newfoundland (MUN) - Faculty of Business Administration

November 2011


Abstract:     
We extend research on the determinants of corporate tax avoidance to include the role of Internal Revenue Service (IRS) monitoring. Our evidence from large samples implies that U.S. public firms undertake less aggressive tax positions when tax enforcement is stricter. Reflecting its first-order economic impact on firms, our coefficient estimates imply that raising the probability of an IRS audit from 19 percent (the 25th percentile in our data) to 37 percent (the 75th percentile) increases their cash effective tax rates, on average, by nearly 2 percentage points, which amounts to a 7 percent increase in cash effective tax rates. These results are robust to controlling for firm size and time, which determine our primary proxy for IRS enforcement, in different ways; specifying several alternative dependent and test variables; and confronting potential endogeneity with instrumental variables and panel data estimations, among other techniques.

Number of Pages in PDF File: 64

Keywords: tax enforcement, corporate governance, IRS audits, taxes, agency costs

JEL Classification: M40, G34, G32, H25

working papers series


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Date posted: September 1, 2010 ; Last revised: August 30, 2013

Suggested Citation

Hoopes, Jeffrey L. and Mescall, Devan and Pittman, Jeffrey, Do IRS Audits Deter Corporate Tax Avoidance? (November 2011). Available at SSRN: http://ssrn.com/abstract=1668628 or http://dx.doi.org/10.2139/ssrn.1668628

Contact Information

Jeffrey L. Hoopes (Contact Author)
Ohio State University (OSU) - Department of Accounting & Management Information Systems ( email )
2100 Neil Avenue
Columbus, OH 43210
United States
Devan Mescall
University of Saskatchewan ( email )
Edwards School of Business
Saskatoon, Saskatchewan S7N 5A7
Canada
Jeffrey A. Pittman
Memorial University of Newfoundland (MUN) - Faculty of Business Administration ( email )
St. John's, Newfoundland A1B 3X5
Canada
709-737-3100 (Phone)
709-737-7680 (Fax)
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