Review of archival tax research: Are there any big potatoes left? ATA Doctoral Consortium Thomas Omer University of Nebraska-Lincoln A Brief History of Tax (Time) • In the beginning – I have no idea, I was not there – You might ask Ed Outslay • 1983 AAA Doctoral Consortium – Mark Wolfson informs participants there is only one tax paper in JAR (his) • 1989 Tax Camp – Scholes and Wolfson Framework • 2001 Shackelford and Shevlin Review • 2010 Hanlon and Heitzman Review • 20?? Where might we go? – Back to the Future-Scholes and Wolfson Framework Recent Literature Non-Tax Costs Tax Strategy Tax Risk Avoidance versus Aggression Inferences Observe Tax Related Outcomes Firm Characteristics Scholes and Wolfson Revisited • Non-Tax Costs – Have we adequately explored the contexts in which these are important and the measures that are representative of the construct? • Tax Strategy – We use the words “tax strategy” but can we really identify one? • Do we need to borrow some theory from other literatures? – Can we identify attributes of tax strategy that are more important and used in practice? • Adaptability, Reversibility, Assurance (SW Chapter 7) – Will these change our inferences about firm behavior? Scholes and Wolfson Revisited • Tax Risk – How do we measure this construct? – This is likely a moderator of tax outcomes Field of “Big Potatoes”? Non-Tax Costs? Tax Strategy? Aggression Level Adaptability? Reversibility? Assurance? Tax Related Outcomes Tax Risk? Suggestions for Finding “Big Potatoes” • Think of firms holistically – Currently, we model individual parts without really considering the collective interrelations of the parts. • Confirmatory Factor Analysis/Structural Equation Modeling • Think of strategy as a collection of decisions overtime – Do firms exhibit patterns that repeat? • Can we map those patterns to infer tax strategy • Tax risk is not entirely explained by economic risk – Tax risk is complex interaction of many factors • Many firms discuss this in their 10Ks • Harder task but likely a necessary one Suggestions for Finding “Big Potatoes” • Ask somebody – Practitioner surveys/Client surveys – Develop archival tests of survey results • (This is happening, but there is some resistance to survey research) • Don’t assume we know something we don’t – Mixed prior literature or poor proxies for underlying constructs • What is non-avoidance? – If firms are not avoiding, what are they doing, and are there real effects to be observed? • How do firms avoid? – Analogous to the real earnings management versus accruals management literature • Do we have innate avoidance and discretionary avoidance and can we separate them Thank you!