Corporate Tax Planning and Enforcement

D. Dyck, Corporate Tax Planning and Enforcement, 2025.

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Abstract
This study investigates how strategic interactions between corporate tax planning and tax enforcement are affected by two policy instruments: strengthening tax enforcement by increasing the number of specialized enforcement staff and improving tax audit technologies. I employ an economic model with a board of director's investment in a Tax Control Framework (TCF) and a tax manager's tax planning effort jointly shaping corporate tax planning and a tax auditor's technology-based audit decision. I show that the board only invests in the TCF when the enforcement environment is sufficiently strict, because it trades-off the costs and benefits of tax planning. Since strengthening tax enforcement decreases tax planning effort, the result can be less investment in a TCF in a strict enforcement environment, implying that TCF investment and enforcement can be strategic substitutes. Strikingly, I identify conditions under which improvements in tax audit technology increase corporate tax planning and impair tax audit efficiency, due to a crowding-out of audit incentives. This result contradicts the view that improving audit technologies is universally effective, particularly in tax authorities with adequate staffing.
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TRR 266 Accounting for Transparency Working Paper Series No. 186
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Dyck D. Corporate Tax Planning and Enforcement.; 2025. doi:10.2139/ssrn.5186857
Dyck, D. (2025). Corporate Tax Planning and Enforcement. https://doi.org/10.2139/ssrn.5186857
@book{Dyck_2025, series={TRR 266 Accounting for Transparency Working Paper Series No. 186}, title={Corporate Tax Planning and Enforcement}, DOI={10.2139/ssrn.5186857}, author={Dyck, Daniel}, year={2025}, collection={TRR 266 Accounting for Transparency Working Paper Series No. 186} }
Dyck, Daniel. Corporate Tax Planning and Enforcement. TRR 266 Accounting for Transparency Working Paper Series No. 186, 2025. https://doi.org/10.2139/ssrn.5186857.
D. Dyck, Corporate Tax Planning and Enforcement. 2025.
Dyck, Daniel. Corporate Tax Planning and Enforcement. 2025, doi:10.2139/ssrn.5186857.
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