Abstract
Financial derivatives play an increasingly common role in corporate tax avoidance. This paper takes a descriptive approach to answer the fundamental, yet underexplored, questions of why derivatives are useful for corporate tax avoidance and how they fulfill this objective. To evaluate why, I develop and discuss a simple framework of research, practical issues, and anecdotes about derivatives-based tax avoidance. I then provide unique insight into how derivatives reduce taxes by discussing the complex transaction-level detail of two derivatives-based tax-planning strategies. Finally, I identify potential issues that might be addressed in future research. Overall, by discussing the concepts and mechanics of derivatives-based tax avoidance, this study serves as prologue to extant and future research on the topic.
Original language | English (US) |
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Pages (from-to) | 37-68 |
Number of pages | 32 |
Journal | Journal of the American Taxation Association |
Volume | 37 |
Issue number | 1 |
DOIs | |
State | Published - Mar 1 2015 |
Keywords
- Derivatives
- Financial instruments
- Tax avoidance
- Tax shelter
ASJC Scopus subject areas
- Accounting
- Finance