Tax Overpayments, Tax Evasion, and Book-Tax Differences

34 Pages Posted: 6 Feb 2008

See all articles by Laszlo Goerke

Laszlo Goerke

University of Trier - Institute of Labour Law and Industrial Relations in the European Union; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Date Written: February 2008

Abstract

A strictly risk-averse manager makes joint decisions on a firm's tax payments and book profit declarations according to accounting standards. It is analysed 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 takes into account these effects when pursuing his own objectives, the changes in tax payments and book profit declarations become theoretically more ambiguous.

Keywords: executive compensation, financial accounting, tax evasion

JEL Classification: H25, H26, M52

Suggested Citation

Goerke, Laszlo, Tax Overpayments, Tax Evasion, and Book-Tax Differences (February 2008). CESifo Working Paper Series No. 2212, Available at SSRN: https://ssrn.com/abstract=1090848

Laszlo Goerke (Contact Author)

University of Trier - Institute of Labour Law and Industrial Relations in the European Union ( email )

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IZA Institute of Labor Economics

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