Conforming Tax Planning and Firms’ Cost Behavior

49 Pages Posted: 6 Aug 2019

See all articles by Jochen Hundsdoerfer

Jochen Hundsdoerfer

Free University of Berlin (FUB); Norwegian Center for Taxation; ESMT European School of Management and Technology

Martin Jacob

University of Navarra, IESE Business School

Date Written: July 1, 2019

Abstract

Using a panel of European private firms, we show that the reaction of operating costs to sales changes increases with corporate taxes, consistent with conforming tax planning. We also find evidence of stickiness in conforming tax planning. Further, we show that conforming tax planning and stickiness of corporate tax planning vary in the cross-section: Firms with losses, firms with access to nonconforming tax planning, or firms with the ability to pass on taxes to stakeholders engage less in conforming tax planning. Altogether, our results suggest that conforming tax planning can affect reported pre-tax cost behavior.

Keywords: corporate taxes, conforming tax planning, cost structure, asymmetric cost behavior, tax avoidance, sticky cost

JEL Classification: D24, H22, H25, H32

Suggested Citation

Hundsdoerfer, Jochen and Jacob, Martin, Conforming Tax Planning and Firms’ Cost Behavior (July 1, 2019). Available at SSRN: https://ssrn.com/abstract=3430726 or http://dx.doi.org/10.2139/ssrn.3430726

Jochen Hundsdoerfer (Contact Author)

Free University of Berlin (FUB) ( email )

Norwegian Center for Taxation ( email )

Helleveien 30
Bergen, Bergen 5045
Norway

ESMT European School of Management and Technology ( email )

Schlossplatz 1
Berlin, Berlin 10178
Germany

Martin Jacob

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
317
Abstract Views
1,943
Rank
172,502
PlumX Metrics