The Functional and Dysfunctional Effects of ERP System Implementation on Tax Planning

• In Event: Potpourri I

Abstract

This study uses a unique dataset to examine the impact of ERP system implementation on the extent of a firm’s tax planning. The tax function is one of the largest consumers of data within a firm, with over 50 percent of time spent gathering tax data and less than 30 percent of time spent on strategic data analysis (PwC 2015). Difficulties in getting high-quality, timely tax information could negatively impact a firm’s tax compliance activities and leave few resources for tax planning. We predict and find that ERP implementation leads to a greater degree of tax planning, resulting in lower tax burdens, despite substantial implementation costs. However, our findings indicate that ERP implementation can also increase managerial discretion in tax planning, resulting in a larger amount of aggressive tax positions. We provide evidence about how ERP systems could have functional and dysfunctional effects on the tax function.

Authors

• Yiyang Zhang, Youngstown State University

• Patrick Wheeler, University of South Florida

• Stephanie Walton, University of South Florida