Corporate tax planning and tax reconciliation disclosures

Abstract

This thesis examines the relationship between tax reconciliation disclosures and corporate tax aggressiveness in Belgian private firms. In a context where tax transparency is increasingly expected by stakeholders, the objective is to understand whether firms engaging in aggressive tax strategies tend to reduce the level of information disclosed in their tax reconciliation. The theoretical framework is based on signaling theory, proprietary cost theory and stakeholder theory. These theories suggest that firms may strategically manage their tax disclosures to limit negative reactions from external parties. The study therefore tests the hypothesis of a negative association between tax aggressiveness and he quantity of information disclosed. To address this question, a quantitative analysis was conducted using financial data from Belfirst database. The final sample consists of 7,638 firm-year observations over the 2010 and 2014 period. The main variables include proxies for tax aggressiveness, a disclosure index built from reconciliation items, and several control variables such as firm size, profitability, leverage, growth and auditor type (Big 4 or other). The results confirm that firms with more aggressive tax behavior disclose less information in their tax reconciliation. This effect is particularly significant for companies audited by non-Big four auditors. These findings support idea that firms may reduce transparency to conceal certain tax practices and avoid scrutiny. This research contributes to the literature on tax disclosure and aggressive tax planning. It also provide insights for policymakers and standard setters seeking to enhance transparency and accountability in corporate tax reporting.