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Tax Overpayments, Tax Evasion, and Book‐Tax Differences
Author(s) -
GOERKE LASZLO
Publication year - 2008
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/j.1467-9779.2008.00380.x
Subject(s) - remuneration , incentive , payment , economics , evasion (ethics) , indirect tax , tax evasion , profit (economics) , accounting , microeconomics , business , public economics , monetary economics , tax reform , finance , immune system , immunology , biology
A strictly risk‐averse manager makes joint decisions on a firm's tax payments and book profit declarations according to accounting standards. It is analyzed how the incentives to overpay or evade taxes and to inflate book profits are influenced by (1) the composition of the manager's remuneration, (2) the ability to control the manager's actions, (3) the costs of making untruthful profit declarations, and (4) the tax rate. If the firm's owner or the government take into account these effects when pursuing their own objectives, the changes in tax payments and book profit declarations become theoretically more ambiguous.