In-house human capital investment in the tax function is a significant input to a firm’s tax planning. Yet, due to lack of data, there is little empirical evidence on whether corporate in-house tax departments are associated with effective tax planning. We examine this issue using hand-collected data on corporate tax employees in S&P1500 firms. We find that firms with larger in-house tax departments are more effective in tax planning: they have lower tax rates, report lower uncertain tax benefits, and exhibit less volatile tax rates. The results are stronger for firms with in-house tax departments that have a higher proportion of senior or longer-tenured tax professionals. Overall, this paper contributes to the literature by looking inside the “black box” of corporate tax departments.
Human Capital, Tax Planning, Tax Avoidance, Tax Risk
Accounting | Corporate Finance
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CHEN, Xia; CHENG, Qiang; CHOW, Travis; and LIU, Yanju.
Corporate In-house Human Capital Investment in Tax Planning. (2017). 1-72. Research Collection School Of Accountancy.
Available at: http://ink.library.smu.edu.sg/soa_research/1417
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This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.