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Defining and Measuring Tax Planning Aggressiveness

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  • Jennifer Blouin

Abstract

In this paper, I discuss the concepts of tax aggressiveness and tax risk from an academic point of view. Although tax aggressiveness is often defined as being in the “eye of the beholder,” this is not terribly satisfactory when attempting to measure empirically tax planning aggressiveness and its associations with firm attributes. I explain that tax planning that results in certain tax benefits should not constitute aggressiveness. Although policy makers may argue that these tax planning opportunities are attributable to tax loopholes, this assertion does not imply that the firm has undertaken any significant risk by entering into such tax planning. By documenting that low effective tax rates are not necessarily associated with risky or uncertain tax planning, I hope to convince future researchers to develop better empirical proxies for capturing aggressive tax planning.

Suggested Citation

  • Jennifer Blouin, 2014. "Defining and Measuring Tax Planning Aggressiveness," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(4), pages 875-900, December.
    • Handle: RePEc:ntj:journl:v:67:y:2014:i:4:p:875-900
    DOI: 10.17310/ntj.2014.4.06
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    References listed on IDEAS

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    1. Chen, Shuping & Chen, Xia & Cheng, Qiang & Shevlin, Terry, 2010. "Are family firms more tax aggressive than non-family firms?," Journal of Financial Economics, Elsevier, vol. 95(1), pages 41-61, January.
    2. Armstrong, Christopher S. & Blouin, Jennifer L. & Larcker, David F., 2012. "The incentives for tax planning," Journal of Accounting and Economics, Elsevier, vol. 53(1), pages 391-411.
    3. Shackelford, Douglas A. & Shevlin, Terry, 2001. "Empirical tax research in accounting," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 321-387, September.
    4. Petro Lisowsky & Leslie Robinson & Andrew Schmidt, 2013. "Do Publicly Disclosed Tax Reserves Tell Us About Privately Disclosed Tax Shelter Activity?," Journal of Accounting Research, Wiley Blackwell, vol. 51(3), pages 583-629, June.
    5. Frischmann, Peter J. & Shevlin, Terry & Wilson, Ryan, 2008. "Economic consequences of increasing the conformity in accounting for uncertain tax benefits," Journal of Accounting and Economics, Elsevier, vol. 46(2-3), pages 261-278, December.
    6. Sonja Olhoft Rego & Ryan Wilson, 2012. "Equity Risk Incentives and Corporate Tax Aggressiveness," Journal of Accounting Research, Wiley Blackwell, vol. 50(3), pages 775-810, June.
    7. Hanlon, Michelle & Heitzman, Shane, 2010. "A review of tax research," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 127-178, December.
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