69 , 2018-03-24
This article discusses multinationals’ disclosure regarding tax strategies in the U.S., which has established the advanced accounting disclosure system. How do a company’s tax planning strategies affect its tax results? The paper focuses on two indicators, efficiency and stability on income tax expenses, by extracting samples from U.S.-based corporations who hold massive accumulated profits and tax-haven subsidiaries in offshore locations. The analysis reveals that, first, the consolidated effective tax rate of corporations that save on U.S. taxes by means of foreign tax credits is lower than when a major tax advantage is present outside the U.S. Second, companies who recognize deferred tax liability related to offshore earnings book relatively stable tax costs compared to others. As a result, we found that, through the accounting disclosure, U.S. multinational corporations clearly communicate their tax planning strategies to wider stakeholders other than tax authorities. Those disclosure examples provide some implications for Japanese corporations, who face the explosion of transparency by BEPS implementation.