Published on 01 Jan 04
by "AUSTRALIAN TAX FORUM" JOURNAL ARTICLE
This study provides evidence of an instance of tax planning in corporate Australia. Tax rules allow firms to shift taxable income to an earlier year by using the inventory valuation options. In the year 1996, the corporate tax rate rose from 33 percent to 36 percent. Firms were predicted to elect the inventory valuation options so as to accelerate the recognition of taxable income in 1995. Further predicted was the acceleration of inventory purchases in 1995 to increase the magnitude of tax savings. The evidence from listed firms in the Connect4 Annual Report Database confirmed that firms with inventory holding responded to the rise in the corporate tax rate by shifting taxable income from 1996 to 1995. These firms also displayed a significant increase in inventory levels from 1994 to 1995. Liquidity, interest cost and tax losses were not found to inhibit the taxable income shifting behaviour.
Alfred V TRAN
Dr Alfred Tran, CPA, is a Senior Lecturer in the School of Accounting and Business Information Systems at the Australian National University. Current at September 2008 Current at 23 September 2008
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David completed a Bachelor of Commerce degree with Honours from The Australian National University.
Current at 27 October 2003 Current at 19 November 2004