27 March 2006

More On Big Corporation Tax Cheating

From the abstract of a paper on the subject via the Tax Pofs Blog:

This paper offers some exploratory analysis of an extraordinarily rich data set of audit and appeals records, matched with tax returns and financial statements, of several thousand corporations. We find that corporate tax noncompliance, at least as measured by deficiencies proposed upon examination, amounts to approximately 13 percent of “true” tax liability. Second, noncompliance is a progressive phenomenon, meaning that noncompliance as a fraction of a scale measure increases with the size of the company. Other things equal, noncompliance is related to two measures of the presence of intangibles and with being a private company. We find some evidence that incentivized executive compensation schemes are associated with more tax noncompliance, but only with respect to bonuses and not for stock options and other equity-related incentive pay.

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