Tax Planning Approaches Face Three Challenges: How the Business Context, Tax Planning Goals, and Tax Manager Power Affect Tax Expense

Abstract

Some corporations pay more taxes than others, which is an extensively researched issue of interest. Tax avoidance is a well-known suspect rationale. Through 19 in-depth interviews with German tax experts, we establish a comprehensive scientific picture of impacts on company tax planning. Our findings imply that three major roadblocks in the tax strategic planning can account for variations in tax expense among businesses. These three obstacles determine which tax planning options are available. Desired in accordance with the objectives of tax planning, and adoptable according to the authority of the tax manager. This study explores the corporate governance role in long-run tax planning and adds to the existing knowledge in a number of ways. To begin, we provide insight into the horizon concerns associated with executive and director remuneration and demonstrate that incentive compensation offers lengthy incentive to boost efficiency by showing a correlation between higher compensation responsiveness and reduced taxes. They discover that effective incentives motivate managers to invest in longer-term pay outs like tax management. Furthermore, we discover that this expenditure in tax planning
helps stockholders; bigger tax administration is directly connected to greater shareholder dividends. Furthermore, tax administrators can wield varying degrees of power inside their firm, influencing their capacity to execute tax planning strategies. Finally, we present generalizable insights into corporate tax planning processes that assist to explain the observed heterogeneity in tax expenses between organizations.