Corporate In-house Tax Departments

59 Pages Posted: 11 Dec 2015 Last revised: 22 Nov 2019

See all articles by Xia Chen

Xia Chen

Singapore Management University

Qiang Cheng

Singapore Management University

Travis Chow

Singapore Management University - School of Accountancy

Yanju Liu

Singapore Management University - School of Accountancy

Date Written: October 14, 2019

Abstract

In-house tax investment is a significant input to a firm’s tax decisions. Yet, due to the lack of data, there is little empirical evidence on how corporate tax departments are associated with tax planning and compliance outcomes. Using hand-collected data on corporate tax employees in S&P1500 firms over the 2009-2014 period, we find that firms with larger tax departments are associated with lower and less volatile cash effective tax rates. Furthermore, using tax employees’ specialization, we identify tax departments’ relative focus on planning or compliance and document a trade-off between tax avoidance and tax risk: tax departments with a more tax planning focus have incrementally greater tax avoidance but higher tax risk, and tax departments with a more tax compliance focus have incrementally lower tax risk but higher tax rates. Overall, this paper contributes to the literature by looking inside the “black box” of corporate tax departments.

Keywords: Human Capital, Tax Planning, Tax Avoidance, Tax Risk

JEL Classification: J24, H25, H26

Suggested Citation

Chen, Xia and Cheng, Qiang and Chow, Travis and Liu, Yanju, Corporate In-house Tax Departments (October 14, 2019). Singapore Management University School of Accountancy Research Paper No. 2016-41, Available at SSRN: https://ssrn.com/abstract=2701723 or http://dx.doi.org/10.2139/ssrn.2701723

Xia Chen

Singapore Management University ( email )

60 Stamford Rd.
Singapore 178900
Singapore

Qiang Cheng (Contact Author)

Singapore Management University ( email )

60 Stamford Road
Singapore, 178900
Singapore

Travis Chow

Singapore Management University - School of Accountancy ( email )

60 Stamford Road
Singapore 178900
Singapore
+65 6808 5450 (Phone)

Yanju Liu

Singapore Management University - School of Accountancy ( email )

60 Stamford Road
Singapore 178900
Singapore

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