The availability of tax sparing credits and the firm s foreign tax credit status have little impact in making tax holidays more influential relative to other decision factors. Our analyses provide some evidence that a portion of these wealth effects are attributable to the loss of Du Pont s earnings, which accounted for approximately 65 percent of Seagram s reported profits. Abstract U.S. taxpayers remit substantial interim tax overpayments. Further analysis indicates that the degree of uncertainty associated with estimating the current-year tax liability significantly increases the propensity to overpay on an interim basis, but that this effect diminishes with taxpayer experience. Preferences are robust to whether taxes are remitted as withholding from wages or as direct payments of estimated taxes.
Findings are consistent with behavioral theories that explain why individuals intertemporal choices.
Douglas F. Prawitt Abstract A generally accepted finding from prior research is that in compliance decision contexts tax preparers exploit ambiguity in tax rules to help clients reach favorable reporting positions. Using an experiment with big-six partners, senior managers, and managers as subjects, this study accomplishes three objectives. First, by directly manipulating the level of ambiguity within a single tax scenario, this study confirms the result that tax professionals interpret ambiguity to the benefit of clients in compliance decision contexts. Second, this study provides initial evidence that decision context affects the way professionals interpret ambiguity. Specifically, the results suggest that tax professionals interpret ambiguity aggressively in compliance contexts but relatively conservatively in planning decision contexts.