What is it about?
The paper addresses two questions concerning corporate tax lobbying: (1) do firms that lobby on tax issues have lower effective tax rates (ETRs) than other lobbying firms in the 3-year period before either type of firm first begins lobbying? (2) do firms that lobby strategically in order to obtain a tax benefit (as opposed to defensive lobbying undertaken to keep a tax benefit) have lower cash ETRs in the 3-year period after such lobbying?
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Why is it important?
Corporate tax lobbying influences tax policy. Yet, the motivates for and outcomes of corporate tax lobbying are poorly understood. Prior research addressing the outcomes of tax lobbying provide conflicting results. This paper disentangles strategic tax lobbying from defensive tax lobbying and observes that the former is associated with future reductions in cash ETRs, whereas the latter are not.
Perspectives
The study is premised on the notion that higher-ETR firms are more likely to lobby strategically to obtain a tax benefit whereas lower-ETR firms are likely to lobby defensively to avoid losing one. The results of the empirical tests suggest that firms lobbying on tax issues are more sophisticated in tax minimization than non-tax lobbying firms and that only the strategic tax lobbiers are rewarded with observable benefits in the form of lower future tax rates.
Janet Meade
University of Houston
Read the Original
This page is a summary of: Strategic Corporate Tax Lobbying, Journal of the American Taxation Association, December 2015, American Accounting Association,
DOI: 10.2308/atax-51043.
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