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

Martin Jacob

WHU - Otto Beisheim School of Management

Date Written: July 1, 2019


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: or

Jochen Hundsdoerfer (Contact Author)

Free University of Berlin (FUB) ( email )

Norwegian Center for Taxation ( email )

Helleveien 30
Bergen, Bergen 5045

Martin Jacob

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
D-56179 Vallendar, 56179


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