Tax Aggressiveness and Earnings Persistence and Its Components

Abstract

The objective of this research is to analyze if companies with higher tax aggressiveness have different levels of earnings persistence components, specifically: i) book-tax differences and ii) tax profit. The study period was from 2010 to 2016, involving Brazilian companies listed on B3. The most aggressive companies ranked tax-dependent by the Effective Tax Rate metric. The results showed that companies, when segregated by levels of tax aggressiveness, present differentiated earnings persistence in their components. It is noted that, in most tax- aggressive companies, tax profit becomes a determining factor for future book income. This paper contributes to the accounting literature by identifying the impact of taxation on earnings quality, in particular, for earnings persistence, which is a fundamental requirement for greater managerial and tax predictability and greater value direction for companies.