Analysis of Unsuccessful Tax Avoiders
Massachusetts Institute of Technology (MIT) - Sloan School of Management
December 31, 2013
A longstanding question is why an important fraction of public companies pay relatively large amounts in taxes, apparently forgoing the benefits of tax avoidance. This study finds that firms with high effective tax rates are, to some extent, unsuccessful tax avoiders. These firms engage in tax avoidance activities but later return part of their tax savings to tax authorities. Moreover, lenders penalize these firms with higher loan spreads and more restrictive contract terms. This effect is economically important and represents a cost of engaging in tax avoidance activities. Overall, this study contributes to our understanding of corporate tax behavior by presenting the first study that analyzes unsuccessful tax avoiders.
Number of Pages in PDF File: 72
Keywords: Unsuccessful Tax Avoidance, Failed Tax Strategies, Tax Settlements, Debt Contracting
JEL Classification: G21, G28, G32, H25, H32working papers series
Date posted: September 25, 2013 ; Last revised: January 2, 2014
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