This paper derives the optimal financial contract when a borrowing entrepreneur can evade taxes in a model of costly state verification. In contrast to previous literature on costly state verification and financial contracting, we find that standard debt contracts are not optimal when tax...

During the period 1996-2000, the coverage of VAT in Pakistan rose by twenty times in terms of the number of firms in the tax net and by ten times in terms of the volume of transactions subject to it. This paper leverages this staggered introduction of VAT in the country to estimate its...

Local governments play dual, but conflicting roles in China's tax system. That is, they are both tax collectors and controlling shareholders of firms subject to tax payments. We investigate how local governments balance their tax collection and tax avoidance incentives. We find that the...

We examine the moderating effect of corporate opacity on the relationship between family firms and tax avoidance. We find, ceteris paribus, that family firms and tax avoidance are negatively associated. However, the negative association is attenuated when corporate opacity increases. Our results...

In this paper, we test empirically whether there is a relationship between corporate income taxes and CEO bonus payments. Using Compustat and ExecuComp data from 1992 to 2010, we find mixed results. Looking at the whole sample, the average bonus contract rewards tax savings excessively in...

Using a large sample of U.S. firms for the period 1995-2008, we provide strong and robust evidence that corporate tax avoidance is positively associated with firm-specific stock price crash risk. This finding is consistent with the following view: Tax avoidance facilitates managerial rent...

This paper examines how providing better information to customs inspectors and monitoring their actions affects tax revenue and fraud detection in Madagascar. First, an instrumental variables strategy is used to show that transaction-specific, third-party valuation advice on a subset of...

The importance of Canada Revenue Agency (CRA) audits to the administration of the Canadian tax system is self-evident. So is the need for CRA to conduct high-quality audits. While audit outcomes are subject to appeals and court challenge, it is not desirable to rely frequently on appeals and the...

We consider a principal-agent model where the agent is a taxpayer and the principal is a tax authority. The principal wants to know the agent’s private information (e.g. emission or income) so that she can then assign a tax to the agent. It is mandatory for the taxpayer to report his...