Internal Information Quality and Tax-Motivated Income Shifting
Posted: 2 Nov 2017
Date Written: October 30, 2017
This study examines whether the quality of a firm's internal information environment influences its tax-motivated income shifting activities. Although income shifting is an important tax planning strategy, evidence regarding its determinants is limited. We find that higher IIQ is associated with greater tax-motivated income shifting, which suggests that higher IIQ enables managers to better identify and execute income shifting opportunities. We find that the influence of IIQ on tax-motivated income shifting varies with firm characteristics. Specifically, we find that higher IIQ is associated with tax-motivated income shifting for firms with greater uncertainty and greater coordination needs. Overall, these results suggest that the improved information obtained through higher quality internal information environments allows managers to increase tax-motivated income shifting.
Keywords: Tax-motivated income shifting, Transfer pricing, Internal information quality, Tax avoidance, International taxation
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