Are Private Firms Really More Tax Aggressive than Public Firms?

45 Pages Posted: 6 Apr 2016 Last revised: 3 Jun 2016

See all articles by Jochen Pierk

Jochen Pierk

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Date Written: April 4, 2016

Abstract

This paper tests the notion that private firms are more tax aggressive than public firms. Tax avoidance measures, e.g. effective tax rates, cannot be used to compare private and public firms when private and public firms have different levels of importance on financial accounting earnings (Hanlon and Heitzman 2010). To disentangle financial reporting incentives from tax aggressiveness, I use the fact that European groups must prepare two sets of financial statements: first, group statements (consolidated), which provide information to investors, and, second, individual statements (unconsolidated), which are used for legal purposes, but not to inform investors. Since in individual statements financial reporting incentives do not vary between public and private firms, I use these effective tax rates to compare private and public firms. My findings show that public, not private, firms are more tax aggressive, as the effective tax rates of public firms are lower in individual and group statements.

Suggested Citation

Pierk, Jochen, Are Private Firms Really More Tax Aggressive than Public Firms? (April 4, 2016). WU International Taxation Research Paper Series No. 2016-02. Available at SSRN: https://ssrn.com/abstract=2758756 or http://dx.doi.org/10.2139/ssrn.2758756

Jochen Pierk (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
389
Abstract Views
1,793
rank
79,225
PlumX Metrics