Management Accounting Section Midyear Meeting

The Effect of Tax Deferral Election on Competition for the Employee

• In Event: Break and Research Exhibition 2
  In Paper Session: Room 2

Abstract

This study investigates the effect of tax deferral election, which allows the employee to elect to defer the payment of employee’s personal income tax and the deduction of firm’s corporate income tax or not, on competition for the employee. Since the consensus about tax deferral election is the requirement of tax deferral election, this study finds that it’s less likely for the firm to allow the employee to file tax deferral election if tax deferral election game isn’t repeated. To attract the employee, the firm may set the offer without (Case 1) or with (Case 2) tax deferral election with the same utility as the outside option or set the offer without tax deferral election with higher utility than the outside option (Case 3). In Case 2 and Case 3, tax deferral election doesn’t affect the outcome of competition for the employee. In Case 1, tax deferral election may attract and retain the employee if tax deferral election game is repeated.

Author

• Tien-Wei Hwang, National Chengchi University and National Tsing Hua University