Are private firms more aggressive tax planners?

50 Pages Posted: 16 Jul 2019 Last revised: 14 Mar 2024

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

Indiana University - Kelley School of Business - Department of Accounting

Date Written: January 1, 2024

Abstract

Drawing on confidential Internal Revenue Service (IRS) data, we examine whether privately held corporations are more aggressive tax planners than their publicly held peers. Contrary to conventional wisdom, we find no consistent evidence that private firms are more aggressive tax planners. We then examine whether private firms’ tax planning differs from that of public firms more generally. We find that private firms engage in more conforming tax planning (planning that also reduces pretax accounting income). However, tests of nonconforming tax planning reveal that private firms generally engage in the same or less planning relative to their public peers. Overall, our findings cast doubt on the belief that private firms are generally more aggressive tax planners than are public firms, but confirm that they engage in more of some forms of general (i.e., conforming) planning.

Keywords: Tax planning, private firms, corporate tax

JEL Classification: H25, H26, K34, M41

Suggested Citation

Hoopes, Jeffrey L. and Langetieg, Patrick and Maydew, Edward L. and Mullaney, Michele, Is Tax Planning Best Done In Private? (August 4, 2020). 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

Indiana University - Kelley School of Business - Department of Accounting ( email )

1309 E. 10th Street
Bloomington, IN 47405
United States

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