Expatriate compensation tax
220526920
Sustainable expatriate compensation in an uncertain environment
Abstract This study examines an important area of strategic global human resource management expatriate managers' compensation in times of global business uncertainty. While expatriation has numerous well documented benefits for multinational corporations (MNCs) it is incredibly costly. In consequence, when global business conditions become uncertain, the expatriate program in MNCs is typically one of the first budget centres to be targeted for cost savings. The MNC typically radically restructures expatriate remuneration. The resultant effect of these actions is a negative impact on the relationship between the expatriate and the MNC, ultimately reducing expatriate performance and thereby abating the many advantages that the expatriate program brings to MNCs. Social Exchange Theory and Real Options theory help to provide a theoretical framework to understand how expatriate compensation decisions can help to create a desirable sustainable expatriate program in MNCs.
Journal of International Management
Jane F Maley Miriam Moeller Alina F Ting
202294362
Examining the Immediate Effects of Recent Tax Law Changes on the Structure of Executive Compensation
We exploit a recent law change to examine the relation between corporate taxes and executive compensation. The "Tax Cuts and Jobs Act" (TCJA) lowered the corporate tax rate from 35 to 21 percent and repealed a long standing exception that allowed companies to deduct executives' qualified performance based compensation in excess of $1 million. These changes are effective for tax years beginning after December 31, 2017. Using a difference in differences design, we find no evidence that the average firm affected by the TCJA in their 2018 fiscal years changed compensation relative to control firms not subject to the new regime until their 2019 fiscal years. We find limited evidence of a reduction in total compensation among less than 10 percent of treated firms. We execute a battery of tests to validate these results. Overall, our findings suggest the tax benefits of executive compensation do not outweigh non tax considerations when firms structure pay.
Lisa De Simone Charles McClure Bridget Stomberg
216287869
THE DISCRIMINATION ANALYSIS OF COMPENSATION POLICY BETWEEN EXPATRIATE AND DOMESTIC EMPLOYEE AT MULTINATIONAL COMPANIES IN SUMATERA UTARA
The existence of expatriate increasingly having an impact on several conflicts in the field of employment in Indonesia. Problems with expatriates are related to various matters including the compensation policy, That's gap between compensation given to expatriates and domestic employee in Indonesia. The issue of unfair compensation by companies to employee is one of the hot issues that occur in compensation policies. This research uses a qualitative approach. Key informants in this study were 4 people, namely 2 expatriate workers and 2 domestic employee who came from several different multinational companies. The results showed that there was discriminatory treatment in establishing compensation policies between expatriate and domestic employee. Expatriate receive a greater compensation policy than domestic employee. There are several factors that are considered why compensation policies for expatriate are so much greater, including the sacrifice of expatriates, exchange rates, differences in lifestyle and culture, differences in needs and facilities as well as the level of company needs for expatriates. The results showed that 78.6% of domestic employee did not agree if expatriate received greater compensation. Domestic employee applying for compensation must follow the pattern of achieving performance so that domestic employee can compete with expatriates.
Yeni Absah Beby Karina Fawzeea Sembiring F Houtman
198706560
A Study on the Improvement of Employees'Invention Compensation Tax
Sang-Hyun Park
226127905
Using Database Approach, With Big Data And Unsupervised Machine Learning To Model Tax Behavior In The Expatriate Community
The researchers interpreted survey results from the Moral Obligation of Paying Just Taxes Survey to identify a range of potential constructs, 18 constructs were identified. Using a big data strategy, data was collected on these 18 constructs. Utilizing effective targeting, 2090 pages of data were collected with 377,783 words, on the tax evasion/tax avoidance topic. Data was scrubbed for pre processing for analysis with KH Coder. Interpretation of the data indicated the 18 constructs could be collapsed into seven overarching constructs. It was upon these seven 'master' constructs that the literature review was prepared. Moving to data analysis, with KH coder, for text analysis and using machine learning output from a Co occurrence Network, Co occurrence Network idealized a triangular structure with three extremities. Correspondence analysis, supported this trend, while Multi Dimensional Scaling with a stress factor of .170, helped specify a new model for tax avoidance and tax evasion. 1)Taxing the rich, 2) Enforcement strategies, 3) Tax planning for business, 4) Capital Gains tax, 5) Wealth and power inequality, 6) Economic effects of taxation, 7) Audits and materiality
Alfred Howard Miller Laila Abdulla Salem AlKindi Alanoud Yousif Abdulla Alblooshi
159359727
The effect of chief financial officers' accounting expertise on corporate tax avoidance: the role of compensation design
Accounting expertise is closely related to corporate tax planning, and hence, corporate chief financial officers (CFOs) with accounting expertise may have advantages in exploiting tax planning opportunities. By manually collecting CFOs' autobiographic information and identifying their accounting related work experience, we empirically examine whether a CFO with accounting expertise is more likely than a CFO without such expertise to exploit tax planning opportunities, resulting in greater corporate tax avoidance. We find that CFOs with accounting expertise are negatively associated with corporate effective tax rates. The average effective tax rate of firms with accounting expert CFOs is approximately 19.4% lower than that of their counterparts with non accounting expert CFOs, ceteris paribus Moreover, the abnormal variable compensation of CFOs with accounting expertise is negatively associated with corporate effective tax rates. The results suggest that the accounting expertise and compensation schemes of CFOs can have a significant effect on the aggressiveness of corporate tax planning.
Ming-Chin Chen Chia-Wen Chang Mei-Chueh Lee
229141659
In the Nick of Time: Performance Based Compensation and Proactive Responses to the Tax Cuts and Jobs Act
The Tax Cuts and Jobs Act of 2017 (TCJA) introduced two major changes that may influence the structure of executive compensation: (1) reducing corporate tax rates from 35 to 21 percent and (2) eliminating the performance based pay exception in Section 162(m) These changes provide incentives to maximize deductible compensation expense in 2017, before the TCJA goes into effect. Therefore, we predict performance based compensation to increase more in 2017 relative to prior years. Consistent with our expectation, we find that the increase in CEO bonus and stock option compensation is significantly greater in 2017. Our difference in difference results are consistent with the tax rate reduction driving the bonus increase and the repeal of the performance based exception leading to the increase in CEO stock options. The TCJA also changed the definition of covered employees to include the CFO. We find weak evidence for abnormal increases in CFO performance based compensation. Additional analyses indicate firms facing stronger tax incentives drive our results. Overall, our findings suggest that firms' responded to the TCJA in the period before it was effective.
Jonathan Durrant James Jianxin Gong Jennifer Howard
226532938
The Association Between Book Tax Differences and CEO Compensation
We examine the effect of book tax differences on CEO compensation. We posit that CEOs can opportunistically exercise the discretion in GAAP to increase accounting income without affecting taxable income and in so doing increase their compensation. We test the data to determine which competing hypothesis dominates efficiency or rent seeking. Under the efficiency hypothesis, the board of directors uses the information in book tax differences to undo CEOs' attempts to artificially inflate accounting income and hence CEO compensation is negatively associated with book tax differences. Under the rent seeking hypothesis, CEOs gain effective control of the pay setting process so that they set their own pay with little oversight from shareholders and directors. Directors do not use the information in book tax differences to undo CEOs' attempted earnings manipulation and this gives rise to a positive association between CEO compensation and book tax differences. Consistent with the efficiency hypothesis, we find that CEO compensation is negatively associated with book tax differences suggesting that directors use the information in book tax differences to reduce excessive CEO compensation. We also find that strong corporate governance structure strengthens the negative association between CEO compensation and book tax differences. Specifically, firms with high insider equity ownership and high proportion of independent directors on the board have lower CEO compensation when book tax differences are large.
Kin-Wai Lee Gillian Yeo
229020292
Did Tax Reform Influence the Prevalence of Nonfinancial Compensation Incentives?
In this study, I examine whether taxes influence the structure of executive compensation incentives. Recently, the Tax Cuts and Jobs Act (TCJA) removed the requirement that bonus plans be tied to objective and verifiable performance measures for the bonus to be tax deductible. A potential consequence of this removal is that firms may begin to rely more heavily on nonfinancial performance measures in their bonus arrangements. I find an increase, post TCJA, in both the number of and the weight applied to nonfinancial performance measures. These changes impacted important outcomes I find an increase in both investor and information uncertainty for firms increasing their use of nonfinancial performance metrics following the TCJA. I also find that the increase in nonfinancial metrics leads to improvements in sustainability outputs (actions aimed at environmental, social, and governance activities) Overall, the results suggest that the recent tax reform facilitated the inclusion of additional nonfinancial performance measures in executive bonus plans, leading to greater investor and information uncertainty.
Zackery D Fox
219379667
How Executive Compensation Changes In Response to Personal Income Tax Shocks (Who Pays the CEO's Income Taxes?
We study the effects of personal income tax on executive compensation. Using a difference in differences approach based on large shocks to personal income tax rates, we find CEOs receive higher pay two years after tax increases. The higher tax burden drives CEOs to sell stock of their firms for liquidity reasons. Accordingly, boards increase equity based pay to strengthen incentives. Pay raises after tax increases are negatively associated with CEO turnover, while the lack of a pay raise leads to lower firm performance. The effect of personal income tax on compensation is asymmetric; CEOs do not receive pay cuts following tax cuts.
Benjamin Bennett Jeffrey Link Coles Zexi Wang