Tax and Corporate Governance (eBook)

Preface 6
Table of Contents 7
List of Authors 10
Part 1: The Link between Taxation and Corporate Governance 15
The Link between Taxation and Corporate Governance 16
Good Corporate Governance: The Tax Dimension 22
1. Putting Tax on the Corporate Board’s Agenda 23
2. Ensuring that Tax Rules Do Not Encourage Behavior that is Contrary to the Interest of the Company and/or its Shareholders 24
3. Conclusion 25
Tax and Corporate Governance: An Economic Approach 26
Tax and Corporate Governance: An Economic Approach 26
1. Introduction 26
2. How Taxation and Corporate Governance Interact 27
3. Empirical Evidence 30
4. Mechanisms to Address the Agency Problem 34
5. Conclusion 42
Tax and Corporate Governance: A Legal Approach 44
1. Economic and Legal Perspectives 44
2. The Taxpayer that Doesn’t Exist 45
3. Who Pays the Corporation’s Taxes? 50
4. Allocating (Corporate) Income Tax 56
5. Profit-oriented Activities and the Corporate Tax 59
6. Income Measurement in Tax and Financial Accounting 70
7. Tax – An Ally to Corporate Governance? 71
8. Conclusion 74
Report on the Discussion 75
1. Introductory Presentations by Dave Hartnett and Jeffrey P. Owens ( Chair: Jeffrey P. Owens) 75
2. Presentations by Mihir A. Desai and Wolfgang Schön ( Chair: Jeffrey P. Owens) 77
Part 2: The Influence of Tax on Corporate Behavior 80
Financial and Tax Accounting: Transparency and “ Truth” 81
1. Introduction: Key Issues 81
2. Conformity of Financial and Commercial Accounts: In Search of “ True Profit” 84
3. Trends and Developments: National Jurisdictions, the EU and IFRS 88
4. The U. K. – Problems with Partial Conformity 93
5. Conclusion and Issues for the Future 99
Taxation, Accounting and Transparency: The Interaction of Financial and Tax Accounting 103
1. Introduction 103
2. Taxation and Accounting – Two Different Worlds ? 103
3. Transparency of the International Accounts and Influence of Transparency on Tax Planning 106
4. Framework for Tax Planning 108
Taxation, Accounting and Transparency: The Missing Trinity of Corporate Life 111
1. Introduction 111
2. The Shifting Corporate Governance Paradigm 111
3. The Shifting Accounting Paradigm 112
4. The Link between Prudence, Capital Maintenance and Taxation 114
5. Risks and Problems Resulting from Book-Tax Conformity 116
6. Potential Benefits of Book-Tax Conformity 118
7. The Road Ahead: IFRS, Taxation and SMEs 119
Tax and the Separation of Ownership and Control 121
1. Introduction 121
2. The Evolution of Ownership and Control in the U.K. 122
3. Pre-Conditions for a Separation of Ownership and Control 125
4. Tax as a Catalyst for Exit by Blockholders 127
5. Taxation and Demand for Shares 144
6. Why Did New Investors Fail to Exercise Control? 155
7. Tax and the Rise of the Widely Held Company in the U. S. 160
8. Conclusion 167
Tax and the Separation of Ownership and Control – Comment on the paper by Steven Bank and Brian R. Cheffins 172
Tax and the Separation of Ownership and Control – Comment on the paper by Steven Bank and Brian R. Cheffins 180
1. The Evolution of Ownership and Control in Germany 180
2. Taxation and Demand for Shares 184
3. Conclusion 184
Report on the Discussion 186
1. Presentations by Judith Freedman, Martina Baumgärtel and Christian Nowotny ( Chair: Hugh Ault) 186
2. Presentation by Steven Bank and Brian R. Cheffins and Comments by Krister Andersson and Norbert Herzig ( Chair: Hugh Ault) 187
Part 3: The Influence of Corporate Governance on Tax Strategy and Compliance 189
Corporate Social Responsibility and Strategic Tax Behavior 190
1. Introduction 190
2. The Three Views of the Corporation: A Historical Perspective8 193
3. Implications of the Three Views for CSR and the Corporate Tax 196
4. The Corporate Tax and CSR from the State’s Perspective 203
5. Conclusion 204
Corporate Social Responsibility and Strategic Tax Behavior – Comment on the paper by Reuven S. Avi- Yonah 206
Tax Risk Management and Board Responsibility 211
1. Introduction 211
2. The Changing Landscape – Why has Tax Risk Management Become Increasingly Important? 212
3. Tax is in the Boardroom – What is the Perspective of the Board? 215
4. Tax Risk Management in Practice 217
5. Board Responsibility 221
6. Future Developments 225
7. Conclusion 226
Report on the Discussion 227
1. Presentation by Reuven S. Avi-Yonah and Comment by Pekka Timonen ( Chair: Wolfgang Schön) 227
2. Presentation by Bernd Erle and Comments by Theo J. Keijzer and Grant Kirkpatrick ( Chair: Wolfgang Schön) 230
Part 4: Tax Shelters, Business Behavior and Professional Responsibilities 232
Disclosure and Civil Penalty Rules in the U. S. Legal Response to Corporate Tax Shelters 233
1. Introduction 233
2. Defining and Deterring Corporate Tax Shelters 236
3. Tax Shelter Disclosure Rules 248
4. Accuracy-Related Penalties 254
5. Conclusion 258
Disclosure and Civil Penalty Rules in the U. S. Legal Response to Corporate Tax Shelters – Comment on the paper by Daniel Shaviro 260
Tax Shelter Disclosure and Civil Penalty Rules – Comment on the paper by Daniel Shaviro 264
1. Self-Assessment System versus State Assessment System 264
2. Criterion of Sphere Responsibility 265
3. Tax Shelter Category 266
Opinion Standards for Tax Practitioners Under U. S. Department of the Treasury Circular 230 267
1. Background 267
2. 1984 Modifications to Circular 230 to Address Tax Shelters 268
3. The “Technical Tax Shelter” Problem of the 1990s 270
4. Modification of Circular 230’ s Opinion Standards to Address Technical Tax Shelters 271
5. Next Steps: The Ongoing Role of Circular 230 in Addressing Potentially Abusive Transactions 276
Opinion Standards for Tax Practitioners Under U. S. Department of the Treasury Circular 230 – Comment on the paper by Michael J. Desmond 278
1. The Underlying Problem Addressed by Circular 230 278
2. The Adequacy of the Solution Offered by Circular 230 in its Current Form 278
Opinion Standards for Tax Practitioners Under U. S. Department of the Treasury Circular 230 – Comment on the paper by Michael J. Desmond 284
Shelters, Schemes, and Abusive Transactions: Why Today’s Thoughtful U. S. Tax Advisors Should Tell Their Clients to “ Just Say No” 289
1. History of Tax Shelters 289
2. The Zenith of the Individual Tax Shelter: The Mid- 1970s Through the Mid- 1980s 291
3. Corporate Tax Shelters 296
4. How Do You Make the Corporate Tax Shelter Problem Go Away? 350
Report on the Discussion 351
1. Presentation by Daniel Shaviro and Comments by Philip Baker and Roman Seer ( Chair: Caroline Silberztein) 351
2. Presentation by Michael J. Desmond and Comments by Tobias Beuchert and Paul Morton ( Chair: Caroline Silberztein) 353
Part 5: Taxation and Corporate Governance – The State of the Art 354
Taxation and Corporate Governance – The State of the Art 355
1. Introduction 356
2. The Influence of Taxation on Corporate Governance 363
3. The Influence of Corporate Governance on Taxation 394
4. Summary and Conclusions 422