Quotation Amberger, Harald, Eberhartinger, Eva, Kasper, Matthias. 2015. The Role of Tax Rate Based Decisions Heuristics in Tax Planning through intra-group financing. National Tax Association's 108th Annual Conference on Taxation, Boston, United States/USA, 19.11.-21.11.


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Abstract

Contrary to standard economic theory, recent empirical findings suggest that firms do not always minimize their tax payments. We conduct a laboratory experiment and find robust evidence that decision biases could offer a behavioral explanation for suboptimal tax planning. When facing time pressure in an intra-group cross-border financing decision, subjects apply heuristics based on the salience of statutory tax rates. This stirs decision makers to underestimate the effects of tax base changes and causes economically suboptimal tax planning decisions. We find that tax planning behavior is largely unaffected by subjects’ work experience or education in accounting, taxation, and finance. Yet, we observe an overconfidence bias in subjects with some relevant work experience. In line with models of rational inattention, an increasing tax burden difference between two tax planning strategies weakly mitigates the use of heuristics and thus the decision bias.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Paper presented at an academic conference or symposium
Language English
Title The Role of Tax Rate Based Decisions Heuristics in Tax Planning through intra-group financing
Event National Tax Association's 108th Annual Conference on Taxation
Year 2015
Date 19.11.-21.11.
Country United States/USA
Location Boston
JEL C91, D03, H32, K34, M21, M41

Associations

People
Amberger, Harald (Details)
Eberhartinger, Eva (Details)
Kasper, Matthias (Former researcher)
Organization
Tax Management Group AB (Details)
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