Is Tax Planning Best Done In Private?

52 Pages Posted: 16 Jul 2019

See all articles by Jeffrey L. Hoopes

Jeffrey L. Hoopes

University of North Carolina (UNC) at Chapel Hill - Accounting Area

Patrick Langetieg

Government of the United States of America - Internal Revenue Service (IRS)

Edward L. Maydew

University of North Carolina at Chapel Hill

Michele Mullaney

University of North Carolina (UNC) at Chapel Hill

Date Written: July 15, 2019

Abstract

We investigate whether privately-held firms engage in more tax planning than do publicly-held firms. Private firms are commonly believed to face lower non-tax costs of tax planning relative to public firms, allowing them to engage in more tax planning. However, empirical evidence of U.S. private firm tax planning is limited, primarily because of difficulty in obtaining private firm data. We make use of detailed administrative data from the Internal Revenue Service, which cover virtually all U.S. public and private firms and allow us to examine a variety of specific tax planning measures. Contrary to conventional wisdom, we find no evidence that private corporations engage in more tax planning relative to similar-sized public corporations in the same industry. Moreover, some evidence suggests that private firms actually engage in less tax planning. These findings are not explained by firm characteristics commonly used to explain tax behavior. These results have important implications for researchers as well as for policymakers and managers.

Keywords: Tax planning, Private corporations, C-corporations

JEL Classification: H25, H26, K34, G38, M41

Suggested Citation

Hoopes, Jeffrey L. and Langetieg, Patrick and Maydew, Edward L. and Mullaney, Michele, Is Tax Planning Best Done In Private? (July 15, 2019). Available at SSRN: https://ssrn.com/abstract=3420362 or http://dx.doi.org/10.2139/ssrn.3420362

Jeffrey L. Hoopes

University of North Carolina (UNC) at Chapel Hill - Accounting Area ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

Patrick Langetieg

Government of the United States of America - Internal Revenue Service (IRS) ( email )

1111 Constitution Avenue, NW
Washington, DC 20224
United States

Edward L. Maydew (Contact Author)

University of North Carolina at Chapel Hill ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-843-9356 (Phone)

HOME PAGE: http://www.kenan-flagler.unc.edu/faculty/directory/accounting/edward-maydew

Michele Mullaney

University of North Carolina (UNC) at Chapel Hill ( email )

300 Kenan Center Drive
Chapel Hill, NC NC 27599
United States

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