Did FIN 48 increase companies’ tax payments? Trade-off between disclosure and tax burdens

A. Tomohara, H. J. Lee and S. Lee

Applied Economics, 2012, vol. 44, issue 32, 4239-4248

Abstract: This article examines the effects of implementing FIN 48 on companies’ tax burdens. While the literature examines how FIN 48 impacts companies’ financial reporting, its effect on tax payments has not yet been explored. We find that FIN 48 likely increased larger companies’ tax burdens. Prior to the adoption of FIN 48, larger companies may have used their asymmetric information advantage over the tax authorities to maintain relatively aggressive tax positions. To the extent that such tax-saving strategies were possible only for larger companies, FIN 48 appears to have reduced the appeal of these more aggressive tax minimization strategies.

Date: 2012
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DOI: 10.1080/00036846.2011.587789

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