Public economics

Value-added tax

Indirect tax

Business

Tax credit

Economics

Deferred tax

Gross income

Tax haven

Tax avoidance

Tax reform

Ad valorem tax

Monetary economics

State income tax

The Accounting Review

ABSTRACT We investigate the relation between tax avoidance and tax uncertainty, where tax uncertainty is the amount of unrecognized tax benefits recorded over the same time period as the tax avoidance. On average, we find that tax avoiders, i.e., firms with relatively low cash effective tax rates, bear significantly greater tax uncertainty than firms that have higher cash effective tax rates. We find that the relation between tax avoidance and tax uncertainty is stronger for firms with frequent patent filings and tax haven subsidiaries, proxies for intangible-related transfer pricing strategies. The findings have implications for several puzzling results in the literature.

When Does Tax Avoidance Result in Tax Uncertainty?