The Study of Tax Aggressiveness and Earnings Persistence and its Components

Abstract

This research aimed to analyze whether companies that present greater tax aggressiveness have different levels of persistence of earnings components. We measured tax aggressiveness by two proxies: i) book-tax differences and ii) effective tax rates. The study period was between 2010 and 2016, involving Brazilian companies listed on B3. The Effective Tax Rate metric classified the most tax aggressive companies. The results showed that companies, when segregated by levels of tax aggressiveness, present differentiated earnings persistence in its components. It is noted that, in most tax-aggressive companies, tax profit becomes a determining factor for book income in the future period. This work contributes to the accounting literature by identifying the impact of taxation on the earnings quality, particularly in the earnings persistence, a fundamental requirement for greater managerial and tax predictability and a greater direction of value for companies.