Does Taxation Education Improve Tax Compliance: An Empirical Study

Abstract

This chapter proposes that tax education, proxied by Master of Science in Taxation (MST) degree, has substantial influence on chief financial officers’ (CFOs) knowledge, skill sets, values, and cognitive preferences and further influences their decisions in tax reporting. By empirically examining the relation between CFOs with MST degree and their companies' tax compliance based on US data between 2004 and 2016, we find that CFOs with MST degree are associated with improved tax compliance, suggesting that US MST education, beyond general accounting education, cultivates graduates with higher levels of professionalism and ethics in the field of taxation. Moreover, we find that CFOs' tenure, age, and compensation influence the relation between tax education and tax compliance, suggesting company's compensation and employee policies influence executives' tax decisions. Finally, we find that pressures from financial reporting and CEOs with accounting educational background could alleviate the role of CFOs with accounting educational background in tax reporting, while institutional owners could strengthen the role of CFOs. This chapter provides evidence regarding the social implication of MST program and has important managerial implication to tax compliance, executive recruitment, and corporate governance.

Citation

Tuo, L. and Han, S. (2024), "Does Taxation Education Improve Tax Compliance: An Empirical Study", Hasseldine, J. (Ed.) Advances in Taxation (Advances in Taxation, Vol. 31), Emerald Publishing Limited, Leeds, pp. 165-208. https://doi.org/10.1108/S1058-749720240000031006