Veranstaltungsprogramm der VHB Jahrestagung

The integration of the tax function in a firm’s decision-making process is typically considered a “black box”. Using novel survey data from 197 large public and private firms in the German-speaking D-A-CH region, I examine the timing of a tax function entering the investment planning process (temporal tax function embeddedness) and the organizational framework facilitating tax integration (organizational tax function embeddedness). I find that earlier temporal tax function embeddedness, supported by stronger organizational tax function embeddedness, positively influences the respondents’ attitude towards the decision-making process. Tax planning firms are associated with earlier temporal tax function embeddedness compared to purely tax compliant firms, indicating that tax planning requires early involvement of the tax function. Furthermore, I find that most respondents prefer an even earlier tax integration compared to the current timing of tax integration in their firm, with the difference between the status quo and desired scenario being smaller for tax planning firms and firms with stronger organizational tax function embeddedness. Overall, this study contributes to unveiling the ‘black box’ of tax integration in investment planning.

On March 03, 2021, the UK’s finance minister Rishi Sunak announced a tax reform that marks a U-turn in the British corporate tax policy, as it includes a significant corporate tax hike to recover the fiscal costs of Covid-19 support measures, which were, as part of the an-nouncement, concurrently extended. This study analyzes the investor reaction to the tax re-form plan and a series of political events that brought its repeal and reinstallation. We find that the capital market reacts positively to the tax reform with regard to companies that are severely affected by the Covid-19 pandemic and the Brexit. However, the extension of Covid-19 support measures and refinancing them through a corporate tax hike comes at the price of penalizing more dynamic and innovative companies, which is reflected in the capital market response. Thus, by looking at the stock market we are able to trace how fiscal adjust-ment in the form of tax rate hikes jeopardizes future growth, as dynamic and innovative com-panies suffer the most. Without any kind of fiscal adjustment and in the light of ensuing fiscal uncertainty, however, government’s financial support stops being positively valued by the stock market and regaining fiscal stability becomes most important for investors.