Description
This paper analyses a previously unexamined but nonetheless important facet of modern society e the
nature and impact of the relationship between in-house tax professionals in large multinational organizations,
and the external business, tax and regulatory environments within which they operate.
Drawing on face-to-face interviews conducted with senior tax executives in US multinational enterprises
(MNEs), we uncover the social reality of the world in which MNEs’ tax executives operate, and find that
these tax professionals are a powerful, elite group of knowledge experts who can significantly shape tax
law and practices. We analyze the activities of these experts who, although working largely in the
shadows of their organizations, are very much engaged in constructing and shaping the wider institutional
environment. From a theoretical perspective that brings together institutional work and the
endogeneity of law, we find these elite professionals engaging in subtle and diffuse exercise of power at a
micro level within their organizations, a meso level between organizations within the field and at a
macro level within the wider external environment.
Tax professionals at work in Silicon Valley
Emer Mulligan
a, *
, Lynne Oats
b
a
J.E. Cairnes School of Business and Economics, National University of Ireland, Galway, Ireland
b
Exeter Business School, United Kingdom
a r t i c l e i n f o
Article history:
Received 23 April 2013
Received in revised form
25 September 2015
Accepted 26 September 2015
Available online xxx
Keywords:
Tax
Institutional theory
Endogeneity of law
Power
Knowledge experts
a b s t r a c t
This paper analyses a previously unexamined but nonetheless important facet of modern society e the
nature and impact of the relationship between in-house tax professionals in large multinational orga-
nizations, and the external business, tax and regulatory environments within which they operate.
Drawing on face-to-face interviews conducted with senior tax executives in US multinational enterprises
(MNEs), we uncover the social reality of the world in which MNEs’ tax executives operate, and ?nd that
these tax professionals are a powerful, elite group of knowledge experts who can signi?cantly shape tax
law and practices. We analyze the activities of these experts who, although working largely in the
shadows of their organizations, are very much engaged in constructing and shaping the wider institu-
tional environment. From a theoretical perspective that brings together institutional work and the
endogeneity of law, we ?nd these elite professionals engaging in subtle and diffuse exercise of power at a
micro level within their organizations, a meso level between organizations within the ?eld and at a
macro level within the wider external environment. This has important implications for our broader
understanding of the tax and regulatory environments which corporate actors inhabit.
© 2015 Elsevier Ltd. All rights reserved.
“I had a friend who was a Tax Director of a company here, a very
large company …that is …quite aggressive in tax planning and …
somebody …asked him ‘how do you decide which organizations …
you will join or you'll be active in?’ He said ‘I don't join an orga-
nization unless I can control it’.” (Silicon Valley Tax Executive (TE),
2005)
“Its [General Electric] extraordinary success is based on an
aggressive strategy that mixes ?erce lobbying for tax breaks and
innovative accounting that enables it to concentrate its pro?ts
offshore. G.E.’s giant tax department, led by a bow-tied former
Treasury of?cial named John Samuels, is often referred to as the
world's best tax law ?rm. Indeed, the company's slogan “Imagi-
nation at Work” ?ts this department well. The teamincludes former
of?cials not just from the Treasury, but also from the I.R.S. and
virtually all the tax-writing committees in Congress.” (New York
Times, 2011)
1. Introduction
There has been considerable hype recently surrounding corpo-
rate tax practices including serious accusations of misconduct. In
this environment new vocabularies are emerging to describe
corporate tax related behaviour: ‘fair share’, tax ‘dodging’,
‘aggressive avoidance’. We are witnessing unprecedented levels of
attention and attempted ‘tax shaming’ on named multinationals by
the media, non-government organisations (NGOs), by national
governments, parliamentary committees and even supranational
bodies. Yet despite all the strident protests and verbiage, there is an
alarming level of misunderstanding and misinformation; and we
still know very little about the actual tax practices of multinational
corporations. We are left to wonder: who are the architects of these
allegedly devious plans and how widespread are these apparently
aberrant practices?
In this paper we shed light on some of these issues, but in so
doing we go back to an earlier, more secretive time, before the
current cacophony commenced. We draw on a series of interviews
with in-house tax professionals who ply their trades within com-
panies; embedded within organisations to manage the tax affairs,
including the relationship with the various tax authorities to whom
* Corresponding author.
E-mail address: [email protected] (E. Mulligan).
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Accounting, Organizations and Society xxx (2015) 1e14
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(2015),http://dx.doi.org/10.1016/j.aos.2015.09.005
they are accountable. In the context of large, multinational orga-
nisations (henceforth MNEs), these professionals are an elite group
of knowledge specialists who engage as individuals and collectively
in institutional work across three levels of practice, within their
organisations, between organisations and within the wider envi-
ronment. We uncover the hidden power of tax professionals in
practice; in shaping tax policy, which in turn has an important and
signi?cant role in fundamentally shaping society (Boden, Killian,
Mulligan, & Oats, 2010; Covaleski, Dirsmith, & Mantzke, 2005).
The contributions of this paper are twofold. Firstly, at an
empirical level, we contribute to a small but rapidly growing body
of literature that views tax as a social and institutional practice
(Gracia & Oats, 2014) and adopts an interpretive approach to pro-
vide a new and rich insightful perspective on the way the tax ?eld
operates in practice. We ?nd MNE tax executives to be a powerful
group of experts, working largely in the shadows of their own or-
ganisations, but also engaged in collective institutional work,
contributing to shared understandings across organisations of the
‘rules specifying how the game is to be played’ and ‘how the
speci?ed actors are supposed to behave’ (Scott, 2008a, p.55). At the
same time, some of these powerful professionals are actively
engaged in shaping the wider regulatory environment, by for
example, making direct representations to government as well as
feeding into the knowledge bases of their peers and of future
generations of tax professionals. We thus shed light on an aspect of
organisational life that has received scant attention previously,
examining one organisational function (the tax function) and
tracing its impact beyond the organisation.
Secondly, at a theoretical level, we bring together two strands of
institutional theory, dealing respectively with the institutional
work of professionals and the endogeneity of law. Supported by our
?ndings, we conceptualise the institutional work of in-house tax
professionals, including that which shapes the laws to which they
are then subjected, as occurring within three layers of ?elds,
demonstrating the complexity and rationale of the overlapping
practices that calls into question more simplistic and sometimes
invalid accounts of the work of tax professionals. Unlike studies
that consider the role of professionals in generating profound social
change (e.g. Suddaby & Viale, 2011), the phenomenon we study
here is more subtle and diffuse. Importantly, we vieworganisations
themselves as sub-?elds (Bourdieu, 2005), and power as relational
(Lawrence, 2008), rather than a resource to be ‘possessed’ (Cooper,
Mahmoud Ezzamel, & Willmott, 2008). In this way we are able to
bring to the fore the dynamic and contingent practices within the
tax ?eld (Gracia & Oats, 2012).
Before discussing the speci?c ?ndings of the empirical study, we
?rst clarify the theoretical positioning of the paper in the next
section. This is followed by elaborating on the role of in-house tax
professionals in each of the ?elds of practice within which they
operate.
1.1. Theoretical considerations
There is growing interest in the institutional work of the pro-
fessions. This body of research reconnects institutional theory to
questions of both agency and power, to consider how institutions
operate through individual agency (Suddaby, 2010). Associated
with this is a strand of theorizing that brings law and society
scholarship together with institutional theory, recognizing the
malleability of law and the interactions between law and organi-
zational practices. Edelman (2007) for example, describes how
legal logic enters into and transforms organizational ?elds through
a process she terms “endogeneity of law”. The professions are
intimately implicated in this process. Here we draw together the
notions of law's endogoneity and the institutional work of a group
of professionals who are actively, but not overtly, engaged in
shaping the legal environment in which they operate, and ulti-
mately society.
A number of studies have sought to explicate the institutional
work performed by professionals in various contexts. Scott (2008b)
charts the shift in scholarship dealing with the professions fromthe
functionalist thinking of the early twentieth century, through the
emergence of a con?ict lens highlighting political aspects of the
professional project from the 1960s onwards, through the more
recent institutional perspectives, some of which introduce a social
constructionist conception to develop new insights.
Lawrence and Suddaby (2006) introduced a taxonomy of insti-
tutional work, identifying various categories of activity within
three broad categories, speci?cally creating, maintaining and dis-
rupting institutions. Currie, Lockett, Finn, Martin, and Waring
(2012) seek to extend Lawrence and Suddaby (2006) typology,
demonstrating the interaction between the different types of
institutional work in a medical professional setting. Suddaby and
Viale (2011) demonstrate the dynamics through which pro-
fessionals recon?gure institutions and ?elds, describing the pro-
fessional project as an endogenous mechanism of institutional
change. They observe that professions wield considerable power
not only as a result of their expert knowledge, but also through
their ability to manipulate the social order within the ?eld.
The professions play a key role in translating legal prescriptions
into organizational practices. But they do more than this e indeed
they are implicated in the very process by which laws come into
being, or once in place, may be modi?ed in the light of practice and
experience. Edelman and Suchman (1997) suggest that law de-
velops meaning through the process of professional interpretation,
and substance through its enactment by organizational actors
responsible for compliance. They further argue that organizations
do not only respond to the law, but are also actively engaged in
constructing and con?guring legal regimes; indeed that it is rare for
legal regulations to come into being independently of those at
whom they are directed. It is rare for regulations to “emerge
independently of the organizational actors whom they ostensibly
govern” (Edelman & Suchman, 1997, p.488).
The endogeneity of law perspective allows us to pay particular
attention to active agency in the context of understanding the so-
cial construction of tax laws. According to Edelman, Uggen, and
Erlanger (1999), law is rendered “endogenous” whereby “organi-
zations are both responding to and constructing the law that reg-
ulates them … the content and meaning of law is determined
within the social ?eld that it is designed to regulate.” (p.407). Even
seemingly clear laws are subject to new interpretations and actors
create, as well as respond to, uncertainties in interpretation (Kelly,
2003).
Much of the scholarship drawing on Edelman and colleagues'
work analyses organizational practices around mediation and
employment law.
1
Like employment law, tax is often viewed as a
‘back of?ce’ function, largely as a result of its highly specialized
knowledge base.
2
Morris and Empson (1998), for example, quote a
Tax Partner from a large accounting ?rm as saying “tax is highly
complex, like an intellectual puzzle”. Tax knowledge is frequently
(mis) represented as codi?ed knowledge, on the assumption that it
resides primarily in the legal ?eld, governed by statute and
1
Although see Kelly (2003) for an extension into employer sponsored child care,
where a curious overlap between employment law and tax law created a ?nancial
incentive to employers to sponsor child care for employees.
2
Unlike employment law specialists who reside within Human Resources and
similar functions, tax specialists are dealing with compliance issues that directly
impact on the ?nancial performance of the organization.
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(2015),http://dx.doi.org/10.1016/j.aos.2015.09.005
interpreted by the judiciary. But this is a narrow view of the nature
of tax rules which are, in practice, socially constructed, highly
negotiated, ?uid, contested and indeterminate (e.g. Gracia & Oats,
2012; Morrell & Tuck, 2014; Picciotto, 2007). The knowledge base
of tax professionals is in large part abstract (Abbott, 1988), and it is
this abstract specialized knowledge that binds these professionals
into a distinct and cohesive group (Larson, 1977; West, 2003) and
also provides them with linguistic capital (Bourdieu, 1991) that
serves as a source of power in their dealings with non-specialists
within (and beyond) their parent organizations (Ezzamel &
Burns, 2005, p. 757e8).
The line of institutional research that has developed at the
interface between institutional theory and law and society has its
origins in dissatisfaction with prior treatments of law, which is
frequently treated as being an exogenous, binding force, based on
the reductionist view that the legal ?eld produces the regulatory
rules of the game for organizations (Powell, 1996), thereby giving
priority to the regulatory pillar (Scott, 2008a).
There is no doubt that law in the form of rules and accompa-
nying sanctions is a prominent source of coercive isomorphism
(DiMaggio & Powell, 1991). We argue, however, that its coercive
nature has been overstated. The endogeneity of law perspective
calls into question in particular the effectiveness of the state as a
source of coercive isomorphism. All laws contain some degree of
ambiguity, and their mere existence alone does not, in itself,
necessarily constitute a source of organizational isomorphism.
Arguably institutional theory has paid insuf?cient attention to law
as dynamic, fragmented and ambiguous (Suchman & Edelman,
1996). Scott (2008a) observes that the ambiguity inherent in
many legal prescriptions means that they are incapable of
providing clear guidance for conduct. Powell (1996) discusses the
value of research conducted by Edelman and colleagues in drawing
together law and society and organization theory, noting in
particular the way in which it demonstrates the variability of
organizational responses to law and the strategic nature of legiti-
macy. He also notes that in-house staff plays a mediating role in
both interpreting and implementing the law (1996, p.964).
In addition to helping to shape the regulatory environment
enacted in law (Covaleski et al., 2005), organizational actors also
actively engage in the institutional work of constructing the
meaning of compliance with the law (Lange, 1999). Organisations,
by constructing the meaning of compliance, mediate the impact of
lawon society (Edelman, 1992). Edelman et al. (1999) examined the
construction of the meaning of compliance with European
employment opportunity law by considering the interactions be-
tween organizations, the professions and the courts, suggesting
that their arguments in this context may well be applicable to other
areas: our paper examines the extent to which this holds in the area
of tax law.
The reciprocal relationship between law and organizations ap-
pears at intra-organizational, organizational ?eld and environment
levels (Suchman & Edelman, 1996). In relation to the ?rst of these,
these authors make an important point in the context of addressing
why and howlaws such as tax law become perceived as ‘important’
or high pro?le, and thus embedded within an organization:
Political considerations will move certain camps within the or-
ganization to portray a particular legal threat as uniquely fear-
some or to portray a particular solution as uniquely effective. If
the organization acts on these alarms, and if other organizations
imitate its actions, the standards for compliance in the organi-
zational ?eld are likely to strengthen, and the law may matter
more than the rules on paper would suggest. (p.939)
When the legal (juridical) ?eld is viewed as a social ?eld, that
overlaps and intersects with a number of other ?elds (Bourdieu,
1987; Edelman, 2007; Madsen & Dezalay, 2002), the process of
institutional change can be seen to emerge from a blurring of
organizational and legal logics. Edelman (2007) de?nes the legal
?eld as comprising “?ows of in?uence, communication and inno-
vation among the various organizations and professions that
interact with legal institutions”, in which the core logic “highlights
rules and rights”, in contrast to the core logic of the organizational
?eld which is (or has been since the 1990s) “ef?ciency and
rationalization”. These contrasting and divergent logics create a
space in which agents can initiate institutional change. As Kelly
(2003, p.613) notes, “the ambiguity of the law prompts the pro-
cess of the collective construction of compliance by professionals,
managers and legal actors such as judges”. A central argument of
this paper is that in-house tax professionals are actively engaged in
institutional work, de?ned as “the purposive action of individuals
and organizations aimed at creating, maintaining and disrupting
institutions” (Lawrence & Suddaby, 2006, p.215), and which in-
cludes initiating and in?uencing institutional change. The scope
and nature of their institutional work is not suf?cient, however, in
our view, to warrant categorization as “institutional entrepre-
neurs”,
3
as will be demonstrated later.
1.2. Empirical context
As noted earlier, organizations' tax departments are frequently
viewed as back room operations and so ‘black boxed’, which tends
to obscure the power and in?uence of the organizational tax
function, and the unsuspected links with other organizations and
the external environment with respect to tax. In-house tax pro-
fessionals may work in the shadows of their organizations, but they
are not isolated e indeed their level of professional interaction and
in?uence within the ?eld and wider environment is signi?cant, and
is inextricably linked to the highly specialised nature of their
expertise. The institution of tax affects us all as citizens, often in
ways that are not fully understood (Boden et al., 2010; Gracia &
Oats, 2012; Oats, 2012) particularly in the context of taxing the
pro?ts of large organizations. The process by which tax revenue is
extracted from multinational companies has increased in
complexity signi?cantly in recent decades, in line with MNEs'
growing power and mobility (Scott, 2010) as well as the ?erce
competition between nations to secure tax revenues from those
corporate operations conducted within their jurisdictional bound-
aries. Such companies' attempts to develop strategies to minimise
their tax liabilities now involve considerable creativity and in-
genuity (Braithwaite, 2005, 2013; Gramlich & Wheeler, 2003;
Knuutinen, 2014; Picciotto, 2007), and include the use of complex
?nancial instruments to disguise the nature of their transactions,
which arguably contributed to the 2008 ?nancial crisis (Keen,
Klemm, & Perry, 2010).
4
For the multinational company, the tax on pro?ts is a signi?cant
cost, which carries signi?cant compliance requirements. Most
companies have a team of tax specialists whose responsibility it is
to manage the process of computing the tax liability, ensure that
?ling and payment obligations are discharged appropriately and
manage the relationship with the relevant tax authorities. Thus the
3
Unlike Covaleski, Dirsmith, & Weiss, 2013 who link mutual endogenisation and
institutional entrepreneurship in the context of market based welfare delivery.
4
The use of complex tax planning arrangements by multinationals is, of course,
currently the subject of signi?cant debate worldwide. The empirical work on which
this paper is based, however, predates these developments. For an overview of the
OECD Base Erosion and Pro?t Shifting work, endorsed by the G20 in September
2013, see the special issue of the Bulletin for International Taxation, June/July 2014,
in particular the editorial by Ault, Sch€ on, and Shay (2014).
E. Mulligan, L. Oats / Accounting, Organizations and Society xxx (2015) 1e14 3
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(2015),http://dx.doi.org/10.1016/j.aos.2015.09.005
in-house tax department is responsible for tax compliance: but it is
also likely to be responsible for tax planning e arranging the cor-
poration's transactions and interactions in ways that will minimise
its tax liabilities. Indeed e discussing the cyclical nature of tax
shelter activity e Braithwaite and Braithwaite (2006) note that tax
planning may go beyond tax minimization, and that corporate tax
departments can become pro?t centers, presenting ‘gaming’ with
tax laws as a business opportunity (see Rostain and Regan (2014)
for insights into the US tax shelter industry).
As a largely ‘hidden’ aspect of organizational and institutional
life e one that has received too little academic research attention e
it is important to clarify the nature and effects of tax activities in
this setting. It is important to understand that in-house tax pro-
fessionals play roles at three different levels of engagement e mi-
cro, meso and macro. In this we concur with Zeitsma and Lawrence
(2010) that focussing the analytic lens too tightly can lead to pat-
terns of activity being misunderstood or oversimpli?ed. Different
groups of actors co-exist at each of these levels, and have varying
degrees of in?uence e and different roles are played out at each
level (sometimes by the same actors adopting different identities)
ranging from the implementation of tax plans and associated
processes at the organizational level (micro), to developing and
setting standards of practice at the organizational ?eld level
(meso), to developing and enacting tax laws at the economic and
political level (macro).
The micro level comprises individual organizations, and the
primary actors here are their in-house tax professionals e the
leaders and executives within their tax departments e who are
charged with managing the organization's tax functions. These
include both compliance with the regulatory requirements of the
jurisdictions where the organization does business, as well as tax
planning e i.e., ensuring its activities are structured in ways that
will minimize its tax liabilities. These actors interact with other
organizational professionals as well as the Chief Financial Of?cer
(CFO) and Board of Directors. The questions we seek to answer at
this level are what is the role of in-house tax directors within their
respective organisations and what are the effects of how they
operate?
Moving beyond the organization, we dissect the external envi-
ronment into two levels, meso and macro. The meso e organiza-
tional ?eld e level is particularly important in terms of
understanding the tax arena. Kelly (2003, p. 613) suggests that
collective activity in reconstructing the practical implications of law
in organizational ?elds is more common than previously recog-
nized in institutional scholarship. For the purpose of this analysis,
the constituents of this group include professional institutes, in-
dustry and geographically based representative groups, external
tax advisers and auditors, (primarily Big 4), suppliers and com-
petitors, analysts and the media. It is important to recognize,
however, that for MNEs the notion of organizational ?eld is
considerably more complex than at a purely national level. At this
level “?elds are multiple, fragmented, ambiguous and inconsistent”
(Kostova, Roth, & Dacin, 2008, p. 998) and also includes organiza-
tions in these roles in other countries. At this level of engagement,
our questions are howdo in-house tax directors interact within the
organizational ?eld and what are the effects of how they operate?
At the macro level stands the wider external environment; the
overall economic and political level within which society's norms
and rules are established, and which “sets the dominant ideology for
the organizational ?eld to translate into organizational controls”
(Hopper &Major, 2007, p.56). The primary actors at this level include
government ministries and regulatory and legislative authorities.
The tax laws by which states extract revenue from multinational
companies are a source of tension resulting partly from the con?ict
governments face between the desire to enact tax laws that generate
suf?cient revenue to meet their needs, and tax laws that are ‘good for
business’ (and thus attract MNEs to operate in their countries, with
the attendant advantages for employment opportunities) while at
the same time achieving a wide range of social objectives. By and
large, political systems worldwide approve of, support and facilitate
companies' tax planning activities through, for example, the provi-
sion of speci?c tax incentives.
5
Other relevant actors at this macro
level of engagement are supranational bodies such as the OECD, IMF,
European Commission and NGOs, each of which have an interest in
tax policy and practice both within and across member states. At this
level, our questions are how do in-house tax professionals collec-
tively seek to in?uence the external environment and what are the
effects of such in?uence?
These three levels can be mapped onto Fligstein's (1991) insti-
tutional spheres namely “the existing strategy and structure of the
organization, the set of organizations comprising the organiza-
tional ?eld, and the state” (p. 312); although arguably ‘state’ is too
limited a construct to capture the dynamics of the macro envi-
ronment in an era of expanded transnational activities (Suddaby,
Cooper, & Greenwood, 2007). The actors and interest groups
operating at these three levels of engagement have different in-
terests, different sources of power and different audiences to whom
they must articulate their claims for legitimacy which ensures there
will be tension and controversy between them, and that their inter-
relationships will be dynamic, dialectic and recursive.
1.3. Methods
This study focuses on 15 MNEs in the information technology
sector. The headquarters of all our respondent companies are
located in the Silicon Valley area of California.
6
These US MNEs
operate in many jurisdictions throughout the world, 62 in the case
of one of the MNEs, and accordingly have many and varied tax is-
sues to address on a worldwide basis. Silicon Valley also provided a
geographically concentrated relevant sample of companies, which
facilitated an ef?cient scheduling of interviews.
7
Choosing these
MNEs was a deliberate attempt to seek out companies and in-
dividuals engaged in the subject being studied; i.e. “purposive
sampling” (Miles & Huberman, 1994, p.27). US MNEs invest heavily
in tax planning activities (Scholes et al., 2015), which incorporate
engagement with the external environment, and there is good
evidence to suggest this investment is economically worthwhile.
8
Importantly for the context of this study, as noted by Kenney
(2000), Silicon Valley “is indeed a rich prize for social science
theories” (p.1).
9
Focussing on one industry (IT in this study) facili-
tates more in-depth interviews: companies operating in the same
industry frequently face similar business and planning issues which
5
Although this has changed recently somewhat with the OECD Base Erosion and
Pro?t Shifting (BEPS) agenda which speci?cally designed to respond to allegations
of disregard by MNEs of national boundaries and their respective regulatory re-
gimes in their attempts to minimize global tax liabilities (OECD, 2015) .
6
Although one company has a Cayman Islands-based tax structure. In this
context it is interesting to note Hines' (1999) point: “It is striking that, in spite of the
appeal of low tax rates, very few multinational ?rms actually relocate their
corporate homes to tax havens. In part, this re?ects the tax and regulatory costs of
doing so, but in part, it also re?ects the unwillingness of governments to impose
excessively heavy tax burdens that encourage widespread departures.” (p.313).
7
See Suchman and Cahill (1996) also for a qualitative study focussing on Silicon
Valley area.
8
Mills, Erickson, and Maydew (1998), examining the tax related expenditures of
365 large US corporations, estimate that (on average) they save $4 for every $1 they
spend on tax planning.
9
See Kenney (2000) for a discussion of the history of Silicon Valley, and some
observations and explanations around critical institutions and organisational rou-
tines for the region.
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(2015),http://dx.doi.org/10.1016/j.aos.2015.09.005
have to be managed from a tax perspective, so this limited focus
provides insights into the commonalities (or otherwise) of why and
how such companies engage with their external environment and
the implications for their subsequent tax planning activities.
Table 1 presents some background facts on all ?fteen companies
involved in this study, covering the nature of their business, turn-
over, number of employees and so forth. This is a diverse group of
companies in terms of turnover, number of employees, age and
worldwide presence.
Face-to-face interviews were carried out with 26 tax executives
fromthese 15 companies. These executives were almost all heading
up the worldwide, US, or international tax function in their
respective organisations from the US. Notably, three of the in-
terviewees hold senior VP positions, The higher the level/position
held in an organisation by the head of tax, the more embedded the
tax function is likely to be whereby one's position and status is a
source of power within the organisation. Job titles held by the tax
executives included: Senior Director of Taxes, VP Tax and Trade, VP
Tax, VP Tax, Licensing and Customs, International Tax Director,
Director, US International Tax and Audits, and Senior VP Taxation.
These interviewees were all part of the ‘elite’
10
set of tax executives.
1.3.1. Data collection
Our primary research method was face-to-face interviews with
tax executives of 15 Silicon Valley IT companies, conducted by one
of the authors during 2005, subsequent to the Enron scandal, but
predating the ?nancial crisis.
11
In terms of Ahrens and Chapman
(2006) observation that interviews can be used with different
methodologies “depending on the notion of reality they are sup-
posed to explore” (p.4), we use them here in line with a construc-
tivist notion of a social reality of tax planning in MNEs. The
interviews enabled us to focus on how the tax executives construct
and understand their experience and thereby work towards un-
derstanding the social reality of the world in which they operate.
The interviews were in-depth and semi-structured giving us some
?exibility and spontaneity and allowing the interviewees “a degree
of freedom to explain their thoughts” (Horton, Macve, & Struyven,
2004, p.340). The interview schedule, used to guide the interviews
was informed by tax planning literature, potential theoretical un-
derpinnings (including new institutional sociology) and by sec-
ondary research conducted on the MNEs participating in the study
and on some topical international tax planning areas. Questions
contained in the interviewschedule revolved around themes which
included: background and organisation of the tax planning func-
tion in the company, tax and strategy, the importance of the tax
function within the company, the interplay between tax and ac-
counting, outsourcing, the role of tax advisors, technical approach
to tax planning, the external in?uences on the company's overall
Table 1
Companies' details.
Company
code
Business description Headquarters Year
founded
Auditors Stock
exchange
No. of employees No. countries
(excl. US)
Turnover ($)
C1 Manufactures computer products and
develops software
Cupertino CA 1970s 1970s
Big 4
Nasdaq 10,000e15,000 10K* 6,000me12,000 m
C2 Provider of services and equipment
for semi-conductor industry
Santa Clara CA 1960s Big 4 Nasdaq 10,000e15,000 18 6,000me12,000 m
C3 Provides consumers and advertisers
with information retrieval products
Oakland CA 1990s Big 4 Nasdaq 500e1000 6 Less than 1,000 m
C4 Provider of internet Marketplace San Jose CA 1990s Big 4 Nasdaq 5000e10,000 26 3,000me5,000 m
C5 Technology solutions provider Palo Alto CA 1930s Big 4 NYSE In excess of 75,000 62 30,000me80,000 m
C6 Semi-conductor manufacturer Santa Clara CA 1960s Big 4 Nasdaq In excess of 75,000 10 30,000me80,000 m
C7 Manufactures disk drives San Jose CA 1980s Big 4 Nasdaq 10,000e15,000 15 3,000me5,000 m
C8 Developer of network administration
and security software
San Jose CA 1990s Big 4 Nasdaq 1000e3000 16 Less than 1,000 m
C9 Enterprise software Redwood CA 1980s Big 4 Nasdaq 40,000e50,000 58 6,000me12,000 m
C10 Developer of sales and marketing
information software
San Mateo CA 1990s Big 4 Nasdaq 3000e5000 31 1,000me2,000 m
C11 Content and network security s/w,
it consulting and training
Cupertino CA 1980s Big 4 Nasdaq 5000e10,000 30 1,000me2,000 m
C12 Developer of design automation
software for integrated circuits etc
Mountain View CA 1980s Big 4 Nasdaq 3000e5000 21 1,000me2,000 m
C13 Manufactures programmable devices
and provides design software
San Jose CA 1980s Big 4 Nasdaq 1000e3000 14 1,000me2,000 m
C14 Scienti?c instruments and vacuum
technologies
Palo Alto CA 1940s Big 4 NYSE 3000e5000 15 1,000me2,000 m
C15 Man:storage devices and provides
storage related software
Scotts Valley,
CA, (Cayman
Islands based)
1970s Big 4 NYSE 40,000e50,000 18 6,000me12,000 m
*Only Ireland and Japan listed.
10
We consciously use the term ‘elite’ here to designate a select group of actors
whose knowledge, abilities and power set them apart from their peers (as distinct
from the more political connotations of the term used to designate an outcome of
the class system, for example in the UK e see Williams (1988).) These tax pro-
fessionals are ‘elites’ due substantially to the seniority of their position within their
respective companies, the highly specialized nature of their expertise and the high
level access they can secure to senior and in?uential government of?cials, repre-
senting power beyond economic power. Indeed they also satisfy many of the
criteria of elite standing identi?ed by Odendahl and Shaw (2001) including a shared
set of attributes and values. This elite tax community is akin to some of the tax
‘elites’ interviewed by Tuck (2013). Powell (1991), recognising “the exercise of
power” as an avenue of institutional reproduction asserts that “[e]lites may be both
the architects and products of the rules and expectations they have helped devise”
(p.191) which is demonstrated in this paper with respect to these tax professionals
(See Aguiar and Schneider (2012) book entitled ‘Research Amongst Elites’ for
further evidence pointing to tax professionals being ‘elites’.).
11
Notably the interviewees were active members of some of the various tax
representative groups operating at the meso level referred to later, for example, the
Silicon Valley Tax Directors Group, the Tax Executives Institute and the High
Technology Tax Institute. Whilst being a member of these groups shapes the in-
terviewees' perspectives, interviewees were not speaking directly on behalf of
these groups. Interviewing the executive membership of such groups and indeed
other members of the meso and macro levels would be a valuable extension of this
study, but the focus of this study was very much on the in house tax executives own
account of how they operate.
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approach to the practice and process of tax planning, networking
among tax professionals, and key regulatory bodies/participators
in?uencing tax policy. Interviewees were informed of these themes
in advance of the interviews. Some interviewees sent emails to the
interviewer following the interview to provide further information
and/or clarify some point made during the interview. Throughout
the course of the interviews, patterns emerged and some probes
became more appropriate than others in the context of stories
around the main themes of enquiry emerging. Importantly, through
this process, ‘the validity of responses is to some extent con?rmed
by their consistency among different interviewees, which enabled a
reasonably coherent overall picture to be developed’ (Horton et al.,
2004, p.348).
We also examined each of the last 10K
12
reports ?led by each
company prior to the interviews. These reports, which include
?nancial statements, provided important contextual documentary
information on the nature of the company's business, the countries
in which it had a physical presence, the identity of its auditors and
so on. While examining ?nancial reports can yield some valuable
information on companies, they do not give real insights into their
tax situations, their approaches to tax management or details about
howthey interact with their external environments e as one of our
respondent tax executives (TEs) pointed out: “I better be careful
saying this on tape but ?nancial statement disclosures are no more
transparent today than they were before. You could not tell what
we're doing.”(TE 14). We also examined the companies' websites,
recent company press releases, press comments, and internet
accessible executive biographies of the interviewees.
1.3.2. Data analysis
All interviews were recorded and written up immediately af-
terwards, noting the tone of the interview, overall impression
formed, and any other signi?cant observations.
13
The interview
transcripts, post-interview notes and email correspondence from
interviewees before and after the interview amounted to a signif-
icant amount of data for analysis. Our data analysis involved pro-
cesses of reduction, classi?cation and interpretation (Lillis, 1999)
which facilitated making sense of our large volume of data (Patton,
2002). We used QSR NVivo to assist our data management and data
interrogation and analysis (Mulligan, Cunningham, & Gawley, in
press), and it also provided a form of ‘audit trail’ (Bringer, Halley
& Johnson, 2006). However, as with other qualitative data anal-
ysis software, as noted by O'Dwyer (2004, p.395), it ‘is merely a tool
designed to assist analysis’. Our coding, a formof ‘ongoing, iterative
re?ection’ (Miles & Huberman, 1994, p.56) started with us using a
number of codes initially based on the themes addressed in the
interview schedule. Upon reading all of the documents again, new
codes were created (for example, Information Sharing, Power, Rela-
tionship with the IRS) and others eliminated (for example, Tax as a
pro?t centre, Outsourcing) as deemed appropriate. This exercise was
critical in ensuring we gave ‘voice to the informants’ in the early
stage of analysing the data and ‘to represent their voices promi-
nently in the reporting of the research’ (Gioia, Corley & Hamilton,
2013). The focus here was to allow the story of the data to
emerge in its ‘raw’ state without much concern for theoretical
insights.
Following the coding process, we read and re-read the coded
reports and started the process of extracting the richest and most
appropriate quotations, bearing in mind our objective to unfold the
nature of the relationship between these in-house tax professionals
and the external business, tax and regulatory environments within
which they operate. This was followed by further analysis, now
drawing on the theoretically relevant constructs from institutional
theory, endogeneity of lawand power. At this stage, it became clear
that the richness of the story is in the understanding of how these
tax professionals co-exist with other actors at the micro, meso and
macro levels of engagement. The ?nal stage of data analysis was to
categorise the voices of the informants and theoretically informed
insights from the ?nal themes, across these three levels of
engagement. This is presented in the next sectionwhich is followed
by further detailed consideration of the way in which the tax pro-
fessionals engage in institutional work to subtly in?uence and ex-
ercise their power on the regulatory environment.
2. The institutional work of in-house tax professionals
The tax professionals working in large US based MNEs are
mostly quali?ed accountants or lawyers, many having trained with
and worked for one of the Big4
14
international accountancy prac-
tices or a large legal practice: some also hold Masters in Tax or MBA
degrees. So they are a group of knowledge experts, likeminded
individuals, who understand each other's perspectives, are simi-
larly trained and may knoweach other fromprior work experience,
providing social capital, and potentially constituting an epistemic
community (Davis Cross, 2013; Haas, 1992) or moral community
(Shadnam & Lawrence, 2011).
2.1. Micro level: intraorganization
At this level of analysis, we are interested in understanding the
role of in-house tax directors and their relations with other actors
within the organization, how they operate, the degree of
embeddedness of the tax function, its perceived importance in the
wider organization, the power of the tax department along with
the effects of this power, and the ways inwhich the role is changing.
Viewing the organization as a sub ?eld (Bourdieu, 2005) in which
struggles take place over valuable capital, allows us to better un-
derstand the position of the tax function in terms of its dominance
or subordination, re?ected in the extent to which tax consider-
ations drive organizational strategy. While there is evidence to
suggest that the tax function tends to be more embedded in larger
organizations (Rego, 2003), we found the degree of embeddedness
depends on a range of factors from the attitude of the CFO, to size
and change in pro?tability levels, to increasing risk levels arising
from international expansion, to a changing regulatory environ-
ment and the extent of integration processes. In particular, the
higher the level position the head of tax holds in an organization,
the more embedded its tax function is likely to be. Having a VP Tax
in place, regardless of the exact nature of their activities or real
powers, indicates that the company takes tax matters seriously, and
so is a source of symbolic capital.
Our study revealed some variation in the wider organization’
perceptions of the importance of the tax department i.e. its position
within the organizational sub ?eld. Some informants were not
convinced that the tax function was highly valued within the orga-
nisation e TE 25, for example, thought it would be viewed as “being
12
Form 10K is the annual report that publicly quoted companies ?le with the U.S.
Securities & Exchange Commission: it provides a comprehensive overview of the
company's business. We did not undertake a systematic content analysis of these
reports, but they nonetheless provide valuable background information that was
used to enhance the interviewing process.
13
For example, some individuals were keen to distinguish his/her company from
others in Silicon Valley using phrases like: ‘we are different’, ‘maybe other com-
panies don't do it this way’, ‘SOX may have changed things for other companies, but
not for us’.
14
‘Big 4’ is the collective term commonly used to refer to the largest four inter-
national accountancy practices, namely, PWC, KPMG, Deloitte and Ernst & Young.
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slightly academic and technical and something that happens in the
background”: he was not con?dent that a lot of people in the com-
pany understand its tax structure, nor that “the tax people have ever
gone out of their way to explain it, it's sort of on a need to knowbasis
almost”. Much of a large organization has no need to engage directly
with the tax function, which makes it easy for tax professionals to
retreat into the shadows, which sometimes happens. However, there
is a growing trend towards involving tax executives up front in
organizational decision-making, partly driven by those professionals
pushing themselves forward over time and so becoming more
engaged with the business. This increasing prominence is also driven
by the fact that these companies are operating in so many different
countries that their tax risks are greater:
I do think that the message is getting [across] loud and clear that
tax is a key player and especially as we expand internationally,
there is a lot of concern about taxes, there is a lot of concern
about the structure that we have and so the groups tend to
involve me a lot more early on. (TE 2)
Education by the tax department of new staff in the business
units was identi?ed as critical:
In-house executives have a role to educate others within the
company of the importance of tax for us e it's a constant re-
education process of every new person that comes in to a busi-
ness unit because they're usually coming from a small failed
dot.com where they've been a VP d and I'm sure you've heard
this one before you know with their Harvard MBA and they had
two plus years in the defunct company and then they come here
and they're very used to going by the seat of their pants and we
don't function that way. So it is our job to educate and evangelize
for the tax department in the different business units. (TE 7)
This particular quote highlights the importance of alignment
between professional habitus and the organisational sub-?eld, and
the need for realignment in the event of mis?t. Some of the in-
terviewees have been employees of their respective organisations
for a very long period of time and TE 2 recognised the value of the
knowledge of the business and structures which himself and his
boss built up over the years
15
: “Something that most companies
don't value enough is institutional knowledge. It's not something
that you can replace. You either have it or you don't”. Such insti-
tutional knowledge, a source of cultural capital, coupled with long-
term internal business relationships provides a rich internal source
of power which helps the pro?le of tax within any company, and
therefore the capacity of tax executives to in?uence decision
making and effect change.
We ?nd evidence of distinctive tax cultures linked to the
importance the organization attributes to tax function. The CFO has
emerged as one of the most powerful organizational actors in terms
of tax being seen as an integral part of how MNEs do business.
Being very well positioned to engage in the necessary political
processes associated with the institutionalisation of tax, the CFO is
a key player in setting an organization's tax culture, so the intro-
duction of a new CFO can lead to its deinstitutionalisation and/or
reinstitutionalisation; lending support to the notion that institu-
tionalization is always an ongoing process.
Many informants described the company's tax strategy in terms
of its overall goals and objectives: common among these across the
companies were legally minimizing companies' effective tax rates,
looking for opportunities to lower taxes further, tax lawcompliance
worldwide, keeping out of trouble (with tax authorities), and being
responsive to such internal ‘customers’ as, fellow professionals in
accounting and human resources. There was general agreement
that a tax strategy should not drive the business, but that, “the
business should drive tax and company tax strategies” (TE 14). TE 5
believed “the tax tail shouldn't wag the operational dog”, while TE
15 observed “we can't have the business behaving in an aberrant
way just for tax purposes”, and TE 10 was keen to point out “we are
not an Enron where we view tax as a standalone function that
should be creating its own planning and savings, tax is an adjunct to
the business”.
16
This latter reference demonstrates the heightened
sensitivities among tax professionals following the corporate
scandals and subsequent US government response, such as the
enactment of Sarbanes Oxley legislation,
17
which spotlights inter-
nal control processes.
The size of MNEs in-house tax departments (in terms of staff
and other resources) varies, as does their relative importance, and
the extent to which they are integrated or embedded in those or-
ganizations. While their size depended on both internal and
external factors, size and complexity of the company and the
amount of resources a company is willing to put into the tax
function, and the increasing demands on tax departments arising
from the changing regulatory environment, were the recurring
determinants referred to by our interviewees. The constitution of
in-house tax departments tended not to be static, and tax team
numbers ?uctuated over time. In the US, there tends to be
considerable movement of tax professionals between in-house
roles and positions in public law and accounting ?rms (at this
level, generally Big 4 companies) or the revenue authority (IRS)
(Borkowski, 2005). We also found evidence of MNEs taking a
strategic attitude towards recruiting ex IRS of?cials and ex partners
from accounting and law practices, with the latter in particular
being well positioned to “orchestrate the company's efforts” in the
endogenous process of tax law making (Suchman & Edelman,
1996), and manage external impressions of the companies
(Covaleski et al., 2005) e for instance, Byrnes and Lavelle (2003)
refer to companies building “powerhouse tax departments staffed
with former government tax experts”. TE6 emphasised these ex-IRS
of?cials ‘had the relationships that were needed’,
18
and the com-
panies certainly do value and use these relationships, a form of
social capital. In the context of IRS of?cials moving to tax practice,
as opposed to industry, TE 14 sees them being hired:
…because of their ability to get things done. They have channels
inside of the IRS but they also know the inner workings, what is
it that makes the IRS click? What is it that makes the IRS do what
they do?
Similarly TE 15 referred to the hiring of their two ex-IRS econ-
omists, to bring the perspective of the ‘other side” and importantly
15
One tax executive for example was with his company over 18 years.
16
For more detailed ?ndings and discussion on the relationship between tax and
business strategy, see Mulligan, E., Cunningham, J. & Gawley, J. (forthcoming).
17
Sarbanes Oxley established new/enhanced standards for all US public company
boards, management, and public accounting ?rms. It also established a new ‘quasi-
public’ agency, the Public Company Accounting Oversight Board (PCAOB), also
referred to by many of the interviewees. This Board is charged with overseeing,
regulating, inspecting, and disciplining accounting ?rms in their roles as auditors of
public companies. Interviewees were particularly exercised about s.404 of SOX
which requires management and the external auditor to report on the adequacy of
the company's internal control over ?nancial reporting. The latter therefore, re-
quires documenting and testing important manual and automated controls with
respect to tax.
18
The implications for the IRS from losing such personnel warrants further ex-
amination but is not relevant for this study. There is also movement into the IRS
from practice, but this was not explored in detail in the interviews.
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“they'll ?ght themwhen they step out of line …and they step out of
line a lot”. Also, hiring economists could re?ect what Meyer and
Rowan (1991) refer to as “[t]he rise of professionalised economics
…econometric analyses help legitimate the organization's plans in
the eyes of investors, customers …and internal participants” (p.51).
With economists on board, for example, it becomes more dif?cult
for tax authorities to challenge decisions such as transfer prices,
which are a particular source of con?ict.
Within the organizational sub-?eld, the in-house tax pro-
fessionals’ role and power is conditioned by the organizational
doxa. Agency in terms of strategic responses to institutional pres-
sure is constrained, some professionals will lean towards acquies-
cence to regulatory requirements as a way to stay under the radar,
keep out of trouble. Others will lean towards avoidance, giving an
appearance of acquiescence and disguising non-conformity with
regulatory expectations.
2.2. Meso level e inter organizational relationships
In this context, the organizational ?eld is the level at which
attempts to secure, or to resist, institutional change are most
visible, bridging the micro and macro levels. Here we are interested
in how in-house tax professionals interact with one another and
with other actors in the ?eld, and the effects of such interactions.
Two actors in particular are relevant at this level e market analysts
and professional organizations e although there are other signi?-
cant players (such as the media), which are beyond the scope of this
paper.
Market analysts exert meso level in?uences on MNEs' tax
practice through their evaluations of ?rm performance, which in-
?uence Boards' perceptions about tax, and also puts pressure on
CFOs e as well as issuing commentaries which impact MNEs' share
prices. They are particularly interested in companies' effective tax
rates ewhat rates they should use for their modelling purposes and
why, and why they might differ from their competitors' rates.
When a CFO has to deal with analysts' questions about their com-
pany's effective tax rate, tax is pushed onto their agenda.
Importantly, in-house tax executives interact frequently with
their counterparts in other organizations via their professional as-
sociations. Such bodies articulate a collective voice for their ?eld,
which can then be relayed to the macro level with the clear
intention of in?uencing the regulatory environment to the advan-
tage of the organizational ?eld as a whole, but also of its individual
organizations (some more than others). Professional institutes and
organizations were clearly very important external in?uences (as
sources of normative and coercive isomorphism) on all of our in-
formants. Equally some informants seek to, and are able to, heavily
in?uence the work and agenda of the institutes. Some professional
institutes (for example the Tax Executives Institute) have a tech-
nical tax focus across a broad range of sub-industries within the
sector (IT in this case) and provide signi?cant educational, and
networking and lobbying platforms. Others e such as the Silicon
Valley Tax Directors Group
19
is a more select group representing
high technology companies, which concentrates on making very
signi?cant lobbying efforts, while others e such as the American
Electronics Association e cover particular IT sub-industries. All
these various groups provide their members with valuable
networking opportunities, but each one also provides something
unique e all of them are clearly important constituents of the
organizational ?eld enabling their members to operate and have
impact across the meso level. Some of our informants were more
actively involved in running these institutes and setting their
agendas e for instance, our informants included the present and
past presidents and board members of the Silicon Valley Chapter of
the Tax Executives Institute, and one was the former head of the
international Tax Executives Institute.
This paper opened with a quote from one of the Silicon Valley
tax executives describing a counterpart in another organization. He
continued his story by saying “He says ‘well I'm not interested in
just being a member of an organization; I want an organization that
I can in?uence to represent the best interest of my company’” and
that is probably not an isolated viewpoint:
So, you know, where you think there's this so called supportive
tax community, there are a number of people who are that way
but there are a number of organizations who are participating …
. solely for the purpose of advancing their own company. (TE 23)
2.2.1. This further underlines agency in action at the organizational
?eld level
The in-house tax executives interviewed were well attuned to
who were members of the tax professional community and their
respective social capital. TE 11 referred to his VP Tax being “fairly
well known in the tax circles”, and described a key player in the
High Tech Tax Institute as “a real mover and shaker in the tax
community”. TE 18 described the tax community in Silicon Valley as
being “a very robust tax community, very, very”, while TE 12
referred to using it as a “private network” when researching the
best tax plans and structures, perhaps in preference to formally
engaging external advisors such as specialist tax service ?rms.
There is a signi?cant power effect at play here whereby information
on tax plans diffuses across companies, often resulting in imple-
mentation and gaining credibility.
2.2.2. Information sharing
The level of information sharing between executives in collab-
orating and competing MNEs is particular to tax executives, even
within the Silicon Valley area, and there appears to be ‘leaders’ and
‘adopters’ of tax plans co-existing happily within this area. This
suggests tax is still a ‘black box’ business item, even if (as noted
earlier) it has become more visible in the recent, post-corporate
scandals, environment
20
. Sharing information, particularly about
tax plans and technical advice about dealing with ambiguities in
tax laws serves to provide legitimacy to preferred tax positions,
yielding a form of power for these companies when taking tax
positions in dealing with Revenue Authorities. This essentially
amounts to a risk management strategy as well as (as it always
does) giving those involved a greater sense of social legitimacy
among trusted network contacts and beyond. TE 9 explained how
this information sharing works between competing companies:
I have known the people at [named company] and [our VP Tax]
has known the tax people at [that company] for twenty years or
more …there is a lot of history there and there is a lot that we
can share … there can be sensitivities too because we are a
customer of theirs and sometimes the business relationships
between companies like [ours] and [theirs] or [with another
named company] for example, major suppliers to [us], there can
be real tensions in those relationships about contracts and
19
The companies represented by this group are dependent on research and
development in order to remain on the cutting edge of technology innovation and
to compete in the international market place.
20
Clearly this has now changed even further and in current times we ?nd
corporate tax plans open to considerable scrutiny in the public arena.
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prices and stuff like that. But on the tax side we generally seem
to be able to put that aside.
Clearly, the specialized nature of the expertise involved allows
these in-house professionals to operate outside of the normal rules
of the commercial con?dentiality game, further evidence of their
‘working in the shadows’. This is not to say there is full and frank
disclosure between them e caution is still necessary to ensure
commercially sensitive information remains con?dential. As one
respondent observed: “there is a limit to how far you can go …it's
touchy, you have to be careful …you can't talk about pricing at all,
no pricing, no market shares, any of that kind of stuff.” (TE 5).
Not all tax arrangements are shared with other ?rms e one
informant explained why he would prefer to keep some tax plans
out of the network: “sometimes you wish they wouldn't take it
public … because it's a good idea and you don't want anybody to
know about it.” (TE 22) This suggests that at times, if too many
businesses engage in tax planning which was not intended by the
legislator, but has now become common practice, it effectively
forces the Revenue Authorities to deal with it, perhaps through a
change in legislation e otherwise Revenue may well choose to
ignore it. It is clearly within the interests of companies to try to
contain such tax planning ideas within a limited group.
The Silicon Valley Tax Directors Group gets together once a
month and
shares problems, concerns …and that is where a lot of sharing
takes place. There are competitors in that group, one guy in
particular who I have known for years is good about calling and
asking, for example, what have you done in France on this
particular issue. (TE 3).
The group, which only has 38 members
21
e the largest com-
panies in Silicon Valley, facing many of the same issues e facilitates
the sharing of information in a more focused and relevant way:
if you've got $500 million in sales you know you don't have time,
you don't have the resources and your issues generally aren't as
complex. So you're really looking at companies like you know $1
billion and plus or $2 billion and plus. Well there's probably only
30 of those …the guy at a start up he's got different problems you
know. He's trying to ?gure out how to ?le his tax returns … to
make sure he meets payroll and …if you had the top 30 Silicon
Valley companies involved, if you had [named four large Silicon
Valley based companies] … well you know as you get further
down their issues …there just isn't as much to share. (TE 14)
This suggests that companies’ tax priorities differ according to
their size and the larger companies, as members of the Silicon
Valley Directors Group present as very powerful and are prepared
to share information on tax matters to enhance this power further.
2.2.3. Links to higher education
The High Technology Tax Institute (based at San Jose State
University) is also in?uential in facilitating education, networking
and information sharing, as well as e rather exceptionally e
engaging academics in tax practice. The Institute is a well-
respected forum in Silicon Valleyemany of our informants have
presented at its conferences or sat on its advisory board. “It's really
very good and because it's here in Silicon Valley it doesn't cost very
much money” (TE 16). Attendance at the various educational
seminars and conferences hosted by such bodies facilitate
networking among tax professionals. One informant (commenting
on Tax Executive Institute seminars) said: “ [they are] good for
networking, just because you're seen, the people in the Valley here
are going to go to them.” (TE 7), while another noted: “it's inter-
esting to see, just by how many people attend, how hot a topic is.”
(TE 19). This highlights how these in-house professionals have to
engage with and keep abreast of the constantly changing tax rules
and regulations. Another described the workings of this elitist
network of tax experts in the following terms:
we're on a number of tax mailing lists where tax, leaders of tax
groups communicate. So if there's an issue that you know one
big company has come out with they sort of hop it out and it
goes to the top tax guys at big companies … so there is a fair
amount of communication among the Tax Directors sort of cir-
cuit as to you know current issues that are going on. (TE 16).
The combination of networking, relationship building,
continuing education, dissemination of research ?ndings and
sharing of information generally apparent among Silicon Valley tax
executives, all facilitated through the workings of various repre-
sentative institutes and organizations (members of the organiza-
tional ?eld) constitute multiple isomorphic pressures (Edelman &
Suchman, 1997). This explains the origins of the homogeneity
(DiMaggio & Powell, 1991) of the tax plans, prevailing industry
practices (Suchman & Edelman, 1996), processes within these
companies and power effects. The roles played by the various in-
stitutes, combined with consideration of the language e terms like
“tax circle”, “tax community” and “social clubs” were regularly used
by our interviewees e suggests the existence of “networks of po-
wer” in Silicon Valley with respect to tax (Edelman et al., 1999;
Suchman & Edelman, 1996). The intensity of the social interaction
(through both formal and informal fora) between these Silicon
Valley based tax executives results in a social reality very peculiar to
the tax world of these companies. This professional network, which
spans across these Silicon Valley companies, also provides a vehicle
for the rapid diffusion of new practices between them (DiMaggio &
Powell, 1991).
At this level the tax professionals are to some extent freed from
organizational structures and their relational, third dimension
(Lukes, 2005) power in the organizational ?eld derives not only
from personal attributes but also those of the organization that
they represent. Some, but not all, of these professionals will engage
in manipulation; shaping values and criteria that are then taken
back into the organization to varying degrees through mimetic
processes.
2.3. Macro level e relations with wider environment
This ?nal section analyses the positioning and roles of in-house
professionals e individually and collectively e in the wider social
and political environment. Here we examine relations between
organisations and the IRS as an organ of the state, but also the wider
regulatory environment. Here, the state creates a “complex,
ambiguous and uncertain legal environment that organisations
must monitor and negotiate” (Kelly, 2003, p.611). We ?nd more
overt evidence of tactics (Oliver, 1991) designed to in?uence the
regulatory framework within which the in-house professionals
operate.
The technology sector in which Silicon Valley companies operate
is changing rapidly in terms of technologies, geographies, mergers
and acquisitions, and ways of doing business, all of which give rise to
new tax obligations and opportunities. Some companies, for
21
It had 38 members when these interviews were conducted. In May 2015 it has
81 members.
E. Mulligan, L. Oats / Accounting, Organizations and Society xxx (2015) 1e14 9
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(2015),http://dx.doi.org/10.1016/j.aos.2015.09.005
example, have recently made their ?rst entries into the retail market,
and selling direct to the consumer e whether through a shop or via
the internet e means there are new tax implications to be examined
and managed. Operating in non-US jurisdictions also throws up
particularly problematic and costly issues: one informant spoke of
signi?cant clashes between his company's business model and the
local tax regimes in China and Singapore. Indeed, one signi?cant
challenge for in-house tax professionals is how to respond to the
increasing uncertainties about tax legislation stemming from some
national ?nance ministries adopting strategies to deal with com-
panies' ‘creative’ tax planning: in the US, for example, these include
‘naming and shaming’ as well as civil prosecutions.
One of the key actors at the external environment level is the
revenue authority. Relationships with our interviewed Silicon
Valley tax executives and the US authority e the Internal Revenue
Service (IRS) e were complex and nuanced, but nonetheless were
much valued by in-house tax professionals and needed to be
carefully managed. One noted:
we never get confused as to where our loyalties lie and what our
responsibilities are …we don't let the tax authority governwhat
we do, they are not our boss but still they are important …there
are certain things you could do that would do so much harm to
that relationship relative to the bene?t you got from it, that you
don't want to do it. (TE 9).
Another informant highlighted an important tension in the in-
house tax professional's role e of acting in the interests of the or-
ganization which engaged them, but still having a professional
obligation to maintaining the overall integrity of the tax system:
I want to develop a good relationship with the IRS so I will never
do anything, which would jeopardize because it's not my money
right. I want to do the right stuff for the company and for the
government … [I think of myself as] like a semi government
agent. (TE 13)
Another informant stressed the coercive power of the ?scal
authority: “the positions that [the ?scal authorities] take, how they
enforce the laws [have] a huge impact on what we do”. (TE 5)
Arguably the ?scal authorities are engaged in symbolic violence
(Oakes, Townley, & Cooper, 1998), using their symbolic power to
exert in?uence in the ?eld (Gracia &Oats, 2012), a ?nding that runs
contrary to some other accounts of the superior power of MNEs vis
a vis the tax authority (for example Morrell & Tuck, 2014).
Many interviewees referred to having ‘good’ relationships with
the IRS. One described the process of IRS of?cials coming to trust
him and his team over time, highlighting an important temporal
dimension e the importance of developing relationships, i.e.
building social capital, over time with other tax professionals (even
from the IRS):
It's an interesting process, … they usually come in, very suspi-
cious e here is a big company, lots of income, there must be
something bad going on. When they get into it and they realize
that we try to do a reasonable job, we will be a little bit
aggressive in certain areas, ?ne, we are not going to hide it from
themand we develop a working relationship where we can have
…conversations on …technical issues, because that is more fun
… it's not contentious on our part … the whole relationship is
good but there are individual issues that can get pretty heated.
(TE 3)
This underscores the complexity of corporate tax practice as an
institution. Specialised knowledge etechnical, as well as abstract e
is not only held by in-house tax professionals to be provided as a
service to their commercial employers: regulatory authority agents
have similar, but not necessarily identical, knowledge bases, and
the two are brought into play in the negotiations, confrontations
and consensus building interactions between the regulator and the
regulates (Lange, 1999). This is consistent with Kelly (2003) who
found that notwithstanding the apparent concreteness of law,
interested actors were able to work with the regulatory agency to
“reconstruct the practical meaning of the law” (p.617).
Having a ‘good relationship’ with the IRS (and tax authorities in
other jurisdictions) stems particularly from a concern for building
credibility with the State (Carruthers, 1995) and maintaining a
position within the ?eld. We ?nd speci?c evidence to support the
idea of the endogenisation (Edelman & Suchman, 1997) of the IRS
audit process within MNEs' tax management, a process which,
arguably, supports the illusion of the ?eld. We found that IRS of?-
cials and tax executives frequently attended the same conferences,
which therefore provided them both with opportunities to build
good communications (Wilson, 1995) and so develop and maintain
what they clearly both see as important, recursive relationships.
Having canvassed the structure and power relationships within
which in-house tax professionals operate, observing the way in
which strategic responses play out differently at the different levels
of analysis, the next section considers in more detail the way in
which these actors engage in institutional work to subtly in?uence
and exercise their power on the regulatory environment which
enables their practices but also constrains them.
3. In?uencing the regulatory environment
We found that in-house tax professionals working in large
multinational organizations operated in a highly complex and
heavily regulated environment. It is tempting to assume they are
passive recipients of regulatory edicts with which they have no
choice but to comply (Meyer & Rowan, 1991), but this would be a
dangerous over simpli?cation that can obscure how tax policy is
made and effected in society (Baker, 2005; Covaleski et al., 2005;
Gramlich & Wheeler, 2003). As Oliver (1991) suggests, organisa-
tions don't blindly mimic but adopt various tactics to achieve
workable compromise. Importantly, here the strategic tactics are
not those of the organization as a whole, but individual actors
within a speci?c organizational function. In house tax directors are
actively engaged in institutional change, either individually e by
taking direct action on behalf of their speci?c employers, or
collectively via their professional representative organizations. We
found many of these were heavily involved in lobbying, a form of
interplay between organizations and legislators that has been
described as a “highly endogenous and reciprocal” relationship
(Suchman & Edelman, 1996, p.938) resulting at times in a softening
of regulations that counter corporate interests (Edelman et al.,
1999), or in the bringing forward of new ones that serve those in-
terests. These representative groups and their members could
never be accused of being passive pawns (Scott, 2008a) when it
comes to tax laws, and their lobbying activities employ both sym-
bolic and social capital (Bourdieu, 1986; Covaleski et al., 2005), and
can be seen as strategic responses (Oliver, 1991) which are carefully
orchestrated, thereby making tax professionals very active players
in the construction and con?guration of tax laws (Edelman &
Suchman, 1997).
We also found evidence of the exercise of power and in?uence
at both the institute level and by certain individuals e typically,
long standing Senior Tax VPs of the largest companies, the elites of
the Silicon Valley tax community e driving agendas within those
institutes. Some of these individuals appear to use the ‘clout’ of
their representative groups purposefully e and even craftily e to
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(2015),http://dx.doi.org/10.1016/j.aos.2015.09.005
serve their own organizations' interests ewhich, of course,
frequently align with those of many other Silicon Valley companies:
since many of themoperate in the same business contexts and thus
face similar tax challenges, this homogeneity with respect to tax
plans and practices is hardly surprising. This “power-play” is
important (Scott, 2008a), and the level of respect and extent of a
hearing that these representatives and individuals appear to
receive from key decision makers e right up to Congress level e
calls into question the success of state regulations as engines of
coercive isomorphism (Scott, 2008a). There is also evidence of an
endogenous relationship extending to compliance and standards,
with one company (at least) being consulted by Financial Ac-
counting Standards Board e the US body that sets accounting
standards e for assistance in developing one of its position papers.
Lobbying is at the forefront of the Silicon Valley Tax Directors
Group's activities, and is funded by its relatively high annual
membership fee ($10,000, compared to a mere $200 for the Tax
Executives Institute). As one informant observed.
It's the lobby fees. They're not trying to make money. What
they're having to do is pay the person in Washington DC that
will take their lobby message to whoever it needs to go to …
they represent some huge companies and Washington listens to
huge companies. (TE 14).
Being able to demonstrate empathy with their position, and
recognizing that there is some element of trading in the process of
in?uencing regulatory authorities, is extremely important. One
informant emphasized the importance in the ‘game’ of not just
going to Congress in times of need:
There are times when we will assist the legislature and the IRS
on regulatory matters but it might not be something we really
care about. You can't just go to Congress when it's really
important to you e they want to see you there all the time. (TE
8)
A number of these companies have appointed external affairs
personnel, usually based in Washington DC, with whom company
tax executives are in regular contact, and whose brief it is to lobby
for particular tax policies and object to others. These agents are
regarded as powerful and political:
That's one of the banes in the US you know … a small circle of
corporations or other individuals have so much in?uence in
getting tax laws enacted: those laws affect us all but they're in
place to optimize the positions of a few organizations … that's
how the game's played and you've got to accept that to some
extent if you want to be in that arena … I'd say there's maybe
four or ?ve companies in this Valley that shape legislation
because they're focused on it, they're bright companies and
they've got the resources. (TE 23)
So many of these companies liaise directly with politicians at
Washington DC in relation to federal tax policy matters on a
continuous basis. Relationships are formed and these external af-
fairs personnel in?uence how tax policy is formed. At times, com-
panies pursue changes to tax legislation (or propose new
legislation) which suit them speci?cally e perhaps even them only.
TE 3 for example referred to a couple of occasions where his
company essentially ‘went it alone’ in crafting and proposing
legislation that would be bene?cial to it alone; TE 8 referred to
having had an input into the Homeland Investment Act
22
(part of
the American Jobs Creation Act 2004) while TE 10, referring to the
work of his external affairs tax staff member, said “he does an
enormous amount of State stuff. So California State, they come to
him to write laws”.
The exercise of power is an avenue of institutional reproduction.
Elites e who tend to be ‘knowledge experts’ and/or skillful nego-
tiators e “… may be both the architects and products of the rules
and expectations they have helped devise” (Powell, 1991, p.191).
Covaleski et al.’s (2005, p.135) study reinforced the notion that,
after negotiations, “the formthe resulting institution takes depends
on the relative power of the actors who support, oppose, or
otherwise strive to in?uence it” (see also Barley & Tolbert, 1997;
Covaleski & Dirsmith, 1988). Marcussen (2006), in a study of cen-
tral bankers, similarly found individuals to be important compo-
nents, with the core of the ?eld's transnational network being
small, coherent and highly interconnected, composed of a few key
individuals able to make an impact on national and international
monetary affairs.
Engaging in external affairs, incorporating direct lobbying of
legislators/Congress staff is an essential business activity for some
Silicon Valley companies. The larger companies invest a separate
and dedicated human resource to managing this activity, which
clearly indicates they derive important bene?ts fromit, presumably
increased economic capital. These companies clearly have and
utilize their social capital to demand and secure access to the right
people e once secured, the access makes the associated bene?ts
possible, which in turn makes the companies even more powerful.
The evidence strongly suggests some of the advantage these com-
panies achieve lies in having real input into shaping tax legislation
that will bene?t their own interests e but not necessarily those of
all companies, nor e perhaps even more importantly e of all tax-
payers or of wider society. These companies, through their elite tax
professionals are involved in proposing tax legislation, and reacting
to proposed tax legislation (Edelman et al., 1999) e as well as in
actively resisting certain tax laws proposed by the regulatory au-
thorities (McBarnet & Whelan, 1992) e clear evidence of endoge-
nisation of tax law making. Our informants used the language and
activities of endogeneity e “negotiation plan”, “game”, “play” e
which all the “players” involved considered “rational”, doxic,
practices.
4. Discussion
In-house tax professionals ostensibly work largely ‘in the
shadows’ within their own organizations, yet are able to signi?-
cantly in?uence and shape tax law and practices, both in their
organizational ?elds and in the wider economic and political en-
vironments. Drawing on their own accounts of how they operate,
we uncover this overlooked aspect of organizational life and
demonstrate the way in which relational power allows these pro-
fessionals to actively participate in the endogenisation of law.
While each of the in-house tax professionals have similar knowl-
edge bases and backgrounds, and mix in similar circles, they are not
equally powerful, which supports the view of power here as rela-
tional. The power to engage in institutional work can be understood
22
A detailed analysis of the evolution of this Act (similar to Bozanic et al.'s (2012)
work on a recent rule change, SEC's Rule 10b5-1, on insider trading) through the
theoretical lens utilised in this paper would further enhance our understanding of
the role of tax professionals and other players in the process. A number of studies of
the Act focus on measuring the ‘success’ of the Act and demonstrating that the main
bene?ciaries of the concession engaged in manipulation and even deception.
Alexander, Scholz, and Mazza (2009) ?nd that lobbying in relation to the Act has a
signi?cant effect on return on investment. Further analysis could include examining
the role and in?uence of lobbyists and an examination of data available via the
Center For Responsive Politics on lobbyist companies, campaign contributions etc.
Other relevant literature in the lobbying and political donations domains should
also be addressed in such work (e.g. Baumgartner & Leech, 2001; Brasher & Lowery,
2006).
E. Mulligan, L. Oats / Accounting, Organizations and Society xxx (2015) 1e14 11
Please cite this article in press as: Mulligan, E., & Oats, L., Tax professionals at work in Silicon Valley, Accounting, Organizations and Society
(2015),http://dx.doi.org/10.1016/j.aos.2015.09.005
as deriving from the relative power within the organization in
which the tax professional works.
At the micro level the role and power of the in-house pro-
fessionals is constrained by the organizational sub-?eld in which
they operate; some will have more freedom than others for crea-
tivity in terms of strategic action responses. There is variation in the
role, and more importantly the pro?le within the organization of
the in house tax professional, linked to the size and complexity of
the organization, which is invariably, re?ected in the complexity of
their tax arrangements. We ?nd in-house tax directors, for
example, performing valuable educational functions, promoting
the importance of tax to the organization and shaping and being
shaped by the organizational tax culture.
At the meso level, the extent to which the work of shaping the
regulatory environment to the ends of particular organisations is
undertaken will be in?uenced not only by the habitus of the
particular professionals involved, but also the attributes of the
organizational sub-?elds from which they come. This is where
mimetic pressures emerge, but the extent to which the in-house
professionals take these pressures back to their own organiza-
tions varies. In house tax directors interact with counterparts from
other organisations, both individually and through professional
network associations. The Silicon Valley professional tax associa-
tions, in particular the Silicon Valley Tax Directors Group, under-
take similar work to that observed by Suchman and Cahill (1996) in
their analysis of business lawyers servicing Silicon Valley organi-
zations: speci?cally, they engage in creating social structures that
help to reduce environmental turbulence by developing shared
understandings and diffusing legitimate practices, creating a
normative and cognitive order that allows in-house professionals
to make sense of regulatory requirements at the micro level, but at
the same time shaping that regulatory environment in the interests
of the ?eld. The spatial boundaries of ?elds are in constant ?ux, and
the tax ?eld is increasingly transnational, but at the same time
more exposed than many at national levels, with new rules and
regulations exposing practices to greater scrutiny, allowing chinks
of light to penetrate into the shadows where in-house tax pro-
fessionals operate.
23
At the macro level, both collectively and individually, but not as
a single uniform body, some in-house tax directors shape and in-
?uence the external environment through input to the legislative
process, as part of the game in which they are all engaged. At the
intraorganizational, micro, level of engagement, in house tax ex-
ecutives apply their professional knowledge base to local problems
with varying degrees of improvisation. They are able to in?uence
the tax culture within their own organisations for example by
inculcating new organizational actors. They engage in shaping the
framework of their professional work at the meso level, and also
participate in interorganizational events, discussions and networks.
It is at the meso and macro levels where their institutional work is
most visible and most in?uential, as they emerge fromthe shadows
of their respective organizations to participate in complex net-
works of interactions. It is at these levels also that the struggle for
in?uence, where the legal ?eld meets the regulatory, bureaucratic
and economic ?elds, and all of which spill across national borders,
is affected by, and affects, transnational governance developments.
We have demonstrated complex and dynamic interactions be-
tween key economic, political and organizational ?eld level actors,
mediated by the institutional work of in-house tax professionals.
Speci?cally, multinational companies have a signi?cant level of
in?uence over the design and implementation of the tax regula-
tions to which they themselves must ultimately adhere, without
much regard, if any, of wider societal consequences. Legislators
meet with and listen to the external affairs executives of such
companies and respond to their particular interests (Edelman &
Suchman, 1997). The question of who should be judge and jury
over the whole process is an interesting one, which requires further
research from other perspectives, including that of the legislators
(in this context including Congress staffers) e only then could one
get a sense of the extent to which a second order effect is at play
(where regulators anticipate regulatee responses) which arguably
brings some balance and pragmatism to the process. The ?nancial
crisis and subsequent responses by governments, NGOs and su-
pranational organisations provides scope for research into how the
dynamics we describe here play out differently at times of eco-
nomic and social stress.
The theoretical perspective adopted here, drawing on the
interplay between institutional work and the endogeneity of law,
has allowed us to examine the otherwise hidden exercise of power.
These elite professionals are engaging in subtle and diffuse activ-
ities that constitute exercises of power to varying degrees, within
their organizations, between organizations within the ?eld and in
shaping the wider environment. Some of this institutional work has
sinister overtones, for example in terms of manipulation tactics
designed to advantage particular organisations and reduce tax
contributions in ways not envisaged by legislators, with negative
consequences for wider society. But it is misleading to assume that
this is always the case; as professionals with a shared interest in
certainty and stability in the wider tax ?eld, maintaining the ?eld
doxa, the institutional work of in-house tax directors is also
directed towards working with the regulators and constraining the
excesses of fellow professionals.
Acknowledgements
We thank David Cooper (editor) and the two anonymous re-
viewers for their supportive and constructive comments. We also
thank the interviewees who participated in this study for their time
and insights and are grateful for the helpful comments received
from participants at the Critical Perspectives on Accounting con-
ference 2011 and the Irish Accounting and Finance Association
Conference 2012.
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doc_426733034.pdf
This paper analyses a previously unexamined but nonetheless important facet of modern society e the
nature and impact of the relationship between in-house tax professionals in large multinational organizations,
and the external business, tax and regulatory environments within which they operate.
Drawing on face-to-face interviews conducted with senior tax executives in US multinational enterprises
(MNEs), we uncover the social reality of the world in which MNEs’ tax executives operate, and find that
these tax professionals are a powerful, elite group of knowledge experts who can significantly shape tax
law and practices. We analyze the activities of these experts who, although working largely in the
shadows of their organizations, are very much engaged in constructing and shaping the wider institutional
environment. From a theoretical perspective that brings together institutional work and the
endogeneity of law, we find these elite professionals engaging in subtle and diffuse exercise of power at a
micro level within their organizations, a meso level between organizations within the field and at a
macro level within the wider external environment.
Tax professionals at work in Silicon Valley
Emer Mulligan
a, *
, Lynne Oats
b
a
J.E. Cairnes School of Business and Economics, National University of Ireland, Galway, Ireland
b
Exeter Business School, United Kingdom
a r t i c l e i n f o
Article history:
Received 23 April 2013
Received in revised form
25 September 2015
Accepted 26 September 2015
Available online xxx
Keywords:
Tax
Institutional theory
Endogeneity of law
Power
Knowledge experts
a b s t r a c t
This paper analyses a previously unexamined but nonetheless important facet of modern society e the
nature and impact of the relationship between in-house tax professionals in large multinational orga-
nizations, and the external business, tax and regulatory environments within which they operate.
Drawing on face-to-face interviews conducted with senior tax executives in US multinational enterprises
(MNEs), we uncover the social reality of the world in which MNEs’ tax executives operate, and ?nd that
these tax professionals are a powerful, elite group of knowledge experts who can signi?cantly shape tax
law and practices. We analyze the activities of these experts who, although working largely in the
shadows of their organizations, are very much engaged in constructing and shaping the wider institu-
tional environment. From a theoretical perspective that brings together institutional work and the
endogeneity of law, we ?nd these elite professionals engaging in subtle and diffuse exercise of power at a
micro level within their organizations, a meso level between organizations within the ?eld and at a
macro level within the wider external environment. This has important implications for our broader
understanding of the tax and regulatory environments which corporate actors inhabit.
© 2015 Elsevier Ltd. All rights reserved.
“I had a friend who was a Tax Director of a company here, a very
large company …that is …quite aggressive in tax planning and …
somebody …asked him ‘how do you decide which organizations …
you will join or you'll be active in?’ He said ‘I don't join an orga-
nization unless I can control it’.” (Silicon Valley Tax Executive (TE),
2005)
“Its [General Electric] extraordinary success is based on an
aggressive strategy that mixes ?erce lobbying for tax breaks and
innovative accounting that enables it to concentrate its pro?ts
offshore. G.E.’s giant tax department, led by a bow-tied former
Treasury of?cial named John Samuels, is often referred to as the
world's best tax law ?rm. Indeed, the company's slogan “Imagi-
nation at Work” ?ts this department well. The teamincludes former
of?cials not just from the Treasury, but also from the I.R.S. and
virtually all the tax-writing committees in Congress.” (New York
Times, 2011)
1. Introduction
There has been considerable hype recently surrounding corpo-
rate tax practices including serious accusations of misconduct. In
this environment new vocabularies are emerging to describe
corporate tax related behaviour: ‘fair share’, tax ‘dodging’,
‘aggressive avoidance’. We are witnessing unprecedented levels of
attention and attempted ‘tax shaming’ on named multinationals by
the media, non-government organisations (NGOs), by national
governments, parliamentary committees and even supranational
bodies. Yet despite all the strident protests and verbiage, there is an
alarming level of misunderstanding and misinformation; and we
still know very little about the actual tax practices of multinational
corporations. We are left to wonder: who are the architects of these
allegedly devious plans and how widespread are these apparently
aberrant practices?
In this paper we shed light on some of these issues, but in so
doing we go back to an earlier, more secretive time, before the
current cacophony commenced. We draw on a series of interviews
with in-house tax professionals who ply their trades within com-
panies; embedded within organisations to manage the tax affairs,
including the relationship with the various tax authorities to whom
* Corresponding author.
E-mail address: [email protected] (E. Mulligan).
Contents lists available at ScienceDirect
Accounting, Organizations and Society
j ournal homepage: www. el sevi er. com/ l ocat e/ aoshttp://dx.doi.org/10.1016/j.aos.2015.09.005
0361-3682/© 2015 Elsevier Ltd. All rights reserved.
Accounting, Organizations and Society xxx (2015) 1e14
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they are accountable. In the context of large, multinational orga-
nisations (henceforth MNEs), these professionals are an elite group
of knowledge specialists who engage as individuals and collectively
in institutional work across three levels of practice, within their
organisations, between organisations and within the wider envi-
ronment. We uncover the hidden power of tax professionals in
practice; in shaping tax policy, which in turn has an important and
signi?cant role in fundamentally shaping society (Boden, Killian,
Mulligan, & Oats, 2010; Covaleski, Dirsmith, & Mantzke, 2005).
The contributions of this paper are twofold. Firstly, at an
empirical level, we contribute to a small but rapidly growing body
of literature that views tax as a social and institutional practice
(Gracia & Oats, 2014) and adopts an interpretive approach to pro-
vide a new and rich insightful perspective on the way the tax ?eld
operates in practice. We ?nd MNE tax executives to be a powerful
group of experts, working largely in the shadows of their own or-
ganisations, but also engaged in collective institutional work,
contributing to shared understandings across organisations of the
‘rules specifying how the game is to be played’ and ‘how the
speci?ed actors are supposed to behave’ (Scott, 2008a, p.55). At the
same time, some of these powerful professionals are actively
engaged in shaping the wider regulatory environment, by for
example, making direct representations to government as well as
feeding into the knowledge bases of their peers and of future
generations of tax professionals. We thus shed light on an aspect of
organisational life that has received scant attention previously,
examining one organisational function (the tax function) and
tracing its impact beyond the organisation.
Secondly, at a theoretical level, we bring together two strands of
institutional theory, dealing respectively with the institutional
work of professionals and the endogeneity of law. Supported by our
?ndings, we conceptualise the institutional work of in-house tax
professionals, including that which shapes the laws to which they
are then subjected, as occurring within three layers of ?elds,
demonstrating the complexity and rationale of the overlapping
practices that calls into question more simplistic and sometimes
invalid accounts of the work of tax professionals. Unlike studies
that consider the role of professionals in generating profound social
change (e.g. Suddaby & Viale, 2011), the phenomenon we study
here is more subtle and diffuse. Importantly, we vieworganisations
themselves as sub-?elds (Bourdieu, 2005), and power as relational
(Lawrence, 2008), rather than a resource to be ‘possessed’ (Cooper,
Mahmoud Ezzamel, & Willmott, 2008). In this way we are able to
bring to the fore the dynamic and contingent practices within the
tax ?eld (Gracia & Oats, 2012).
Before discussing the speci?c ?ndings of the empirical study, we
?rst clarify the theoretical positioning of the paper in the next
section. This is followed by elaborating on the role of in-house tax
professionals in each of the ?elds of practice within which they
operate.
1.1. Theoretical considerations
There is growing interest in the institutional work of the pro-
fessions. This body of research reconnects institutional theory to
questions of both agency and power, to consider how institutions
operate through individual agency (Suddaby, 2010). Associated
with this is a strand of theorizing that brings law and society
scholarship together with institutional theory, recognizing the
malleability of law and the interactions between law and organi-
zational practices. Edelman (2007) for example, describes how
legal logic enters into and transforms organizational ?elds through
a process she terms “endogeneity of law”. The professions are
intimately implicated in this process. Here we draw together the
notions of law's endogoneity and the institutional work of a group
of professionals who are actively, but not overtly, engaged in
shaping the legal environment in which they operate, and ulti-
mately society.
A number of studies have sought to explicate the institutional
work performed by professionals in various contexts. Scott (2008b)
charts the shift in scholarship dealing with the professions fromthe
functionalist thinking of the early twentieth century, through the
emergence of a con?ict lens highlighting political aspects of the
professional project from the 1960s onwards, through the more
recent institutional perspectives, some of which introduce a social
constructionist conception to develop new insights.
Lawrence and Suddaby (2006) introduced a taxonomy of insti-
tutional work, identifying various categories of activity within
three broad categories, speci?cally creating, maintaining and dis-
rupting institutions. Currie, Lockett, Finn, Martin, and Waring
(2012) seek to extend Lawrence and Suddaby (2006) typology,
demonstrating the interaction between the different types of
institutional work in a medical professional setting. Suddaby and
Viale (2011) demonstrate the dynamics through which pro-
fessionals recon?gure institutions and ?elds, describing the pro-
fessional project as an endogenous mechanism of institutional
change. They observe that professions wield considerable power
not only as a result of their expert knowledge, but also through
their ability to manipulate the social order within the ?eld.
The professions play a key role in translating legal prescriptions
into organizational practices. But they do more than this e indeed
they are implicated in the very process by which laws come into
being, or once in place, may be modi?ed in the light of practice and
experience. Edelman and Suchman (1997) suggest that law de-
velops meaning through the process of professional interpretation,
and substance through its enactment by organizational actors
responsible for compliance. They further argue that organizations
do not only respond to the law, but are also actively engaged in
constructing and con?guring legal regimes; indeed that it is rare for
legal regulations to come into being independently of those at
whom they are directed. It is rare for regulations to “emerge
independently of the organizational actors whom they ostensibly
govern” (Edelman & Suchman, 1997, p.488).
The endogeneity of law perspective allows us to pay particular
attention to active agency in the context of understanding the so-
cial construction of tax laws. According to Edelman, Uggen, and
Erlanger (1999), law is rendered “endogenous” whereby “organi-
zations are both responding to and constructing the law that reg-
ulates them … the content and meaning of law is determined
within the social ?eld that it is designed to regulate.” (p.407). Even
seemingly clear laws are subject to new interpretations and actors
create, as well as respond to, uncertainties in interpretation (Kelly,
2003).
Much of the scholarship drawing on Edelman and colleagues'
work analyses organizational practices around mediation and
employment law.
1
Like employment law, tax is often viewed as a
‘back of?ce’ function, largely as a result of its highly specialized
knowledge base.
2
Morris and Empson (1998), for example, quote a
Tax Partner from a large accounting ?rm as saying “tax is highly
complex, like an intellectual puzzle”. Tax knowledge is frequently
(mis) represented as codi?ed knowledge, on the assumption that it
resides primarily in the legal ?eld, governed by statute and
1
Although see Kelly (2003) for an extension into employer sponsored child care,
where a curious overlap between employment law and tax law created a ?nancial
incentive to employers to sponsor child care for employees.
2
Unlike employment law specialists who reside within Human Resources and
similar functions, tax specialists are dealing with compliance issues that directly
impact on the ?nancial performance of the organization.
E. Mulligan, L. Oats / Accounting, Organizations and Society xxx (2015) 1e14 2
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(2015),http://dx.doi.org/10.1016/j.aos.2015.09.005
interpreted by the judiciary. But this is a narrow view of the nature
of tax rules which are, in practice, socially constructed, highly
negotiated, ?uid, contested and indeterminate (e.g. Gracia & Oats,
2012; Morrell & Tuck, 2014; Picciotto, 2007). The knowledge base
of tax professionals is in large part abstract (Abbott, 1988), and it is
this abstract specialized knowledge that binds these professionals
into a distinct and cohesive group (Larson, 1977; West, 2003) and
also provides them with linguistic capital (Bourdieu, 1991) that
serves as a source of power in their dealings with non-specialists
within (and beyond) their parent organizations (Ezzamel &
Burns, 2005, p. 757e8).
The line of institutional research that has developed at the
interface between institutional theory and law and society has its
origins in dissatisfaction with prior treatments of law, which is
frequently treated as being an exogenous, binding force, based on
the reductionist view that the legal ?eld produces the regulatory
rules of the game for organizations (Powell, 1996), thereby giving
priority to the regulatory pillar (Scott, 2008a).
There is no doubt that law in the form of rules and accompa-
nying sanctions is a prominent source of coercive isomorphism
(DiMaggio & Powell, 1991). We argue, however, that its coercive
nature has been overstated. The endogeneity of law perspective
calls into question in particular the effectiveness of the state as a
source of coercive isomorphism. All laws contain some degree of
ambiguity, and their mere existence alone does not, in itself,
necessarily constitute a source of organizational isomorphism.
Arguably institutional theory has paid insuf?cient attention to law
as dynamic, fragmented and ambiguous (Suchman & Edelman,
1996). Scott (2008a) observes that the ambiguity inherent in
many legal prescriptions means that they are incapable of
providing clear guidance for conduct. Powell (1996) discusses the
value of research conducted by Edelman and colleagues in drawing
together law and society and organization theory, noting in
particular the way in which it demonstrates the variability of
organizational responses to law and the strategic nature of legiti-
macy. He also notes that in-house staff plays a mediating role in
both interpreting and implementing the law (1996, p.964).
In addition to helping to shape the regulatory environment
enacted in law (Covaleski et al., 2005), organizational actors also
actively engage in the institutional work of constructing the
meaning of compliance with the law (Lange, 1999). Organisations,
by constructing the meaning of compliance, mediate the impact of
lawon society (Edelman, 1992). Edelman et al. (1999) examined the
construction of the meaning of compliance with European
employment opportunity law by considering the interactions be-
tween organizations, the professions and the courts, suggesting
that their arguments in this context may well be applicable to other
areas: our paper examines the extent to which this holds in the area
of tax law.
The reciprocal relationship between law and organizations ap-
pears at intra-organizational, organizational ?eld and environment
levels (Suchman & Edelman, 1996). In relation to the ?rst of these,
these authors make an important point in the context of addressing
why and howlaws such as tax law become perceived as ‘important’
or high pro?le, and thus embedded within an organization:
Political considerations will move certain camps within the or-
ganization to portray a particular legal threat as uniquely fear-
some or to portray a particular solution as uniquely effective. If
the organization acts on these alarms, and if other organizations
imitate its actions, the standards for compliance in the organi-
zational ?eld are likely to strengthen, and the law may matter
more than the rules on paper would suggest. (p.939)
When the legal (juridical) ?eld is viewed as a social ?eld, that
overlaps and intersects with a number of other ?elds (Bourdieu,
1987; Edelman, 2007; Madsen & Dezalay, 2002), the process of
institutional change can be seen to emerge from a blurring of
organizational and legal logics. Edelman (2007) de?nes the legal
?eld as comprising “?ows of in?uence, communication and inno-
vation among the various organizations and professions that
interact with legal institutions”, in which the core logic “highlights
rules and rights”, in contrast to the core logic of the organizational
?eld which is (or has been since the 1990s) “ef?ciency and
rationalization”. These contrasting and divergent logics create a
space in which agents can initiate institutional change. As Kelly
(2003, p.613) notes, “the ambiguity of the law prompts the pro-
cess of the collective construction of compliance by professionals,
managers and legal actors such as judges”. A central argument of
this paper is that in-house tax professionals are actively engaged in
institutional work, de?ned as “the purposive action of individuals
and organizations aimed at creating, maintaining and disrupting
institutions” (Lawrence & Suddaby, 2006, p.215), and which in-
cludes initiating and in?uencing institutional change. The scope
and nature of their institutional work is not suf?cient, however, in
our view, to warrant categorization as “institutional entrepre-
neurs”,
3
as will be demonstrated later.
1.2. Empirical context
As noted earlier, organizations' tax departments are frequently
viewed as back room operations and so ‘black boxed’, which tends
to obscure the power and in?uence of the organizational tax
function, and the unsuspected links with other organizations and
the external environment with respect to tax. In-house tax pro-
fessionals may work in the shadows of their organizations, but they
are not isolated e indeed their level of professional interaction and
in?uence within the ?eld and wider environment is signi?cant, and
is inextricably linked to the highly specialised nature of their
expertise. The institution of tax affects us all as citizens, often in
ways that are not fully understood (Boden et al., 2010; Gracia &
Oats, 2012; Oats, 2012) particularly in the context of taxing the
pro?ts of large organizations. The process by which tax revenue is
extracted from multinational companies has increased in
complexity signi?cantly in recent decades, in line with MNEs'
growing power and mobility (Scott, 2010) as well as the ?erce
competition between nations to secure tax revenues from those
corporate operations conducted within their jurisdictional bound-
aries. Such companies' attempts to develop strategies to minimise
their tax liabilities now involve considerable creativity and in-
genuity (Braithwaite, 2005, 2013; Gramlich & Wheeler, 2003;
Knuutinen, 2014; Picciotto, 2007), and include the use of complex
?nancial instruments to disguise the nature of their transactions,
which arguably contributed to the 2008 ?nancial crisis (Keen,
Klemm, & Perry, 2010).
4
For the multinational company, the tax on pro?ts is a signi?cant
cost, which carries signi?cant compliance requirements. Most
companies have a team of tax specialists whose responsibility it is
to manage the process of computing the tax liability, ensure that
?ling and payment obligations are discharged appropriately and
manage the relationship with the relevant tax authorities. Thus the
3
Unlike Covaleski, Dirsmith, & Weiss, 2013 who link mutual endogenisation and
institutional entrepreneurship in the context of market based welfare delivery.
4
The use of complex tax planning arrangements by multinationals is, of course,
currently the subject of signi?cant debate worldwide. The empirical work on which
this paper is based, however, predates these developments. For an overview of the
OECD Base Erosion and Pro?t Shifting work, endorsed by the G20 in September
2013, see the special issue of the Bulletin for International Taxation, June/July 2014,
in particular the editorial by Ault, Sch€ on, and Shay (2014).
E. Mulligan, L. Oats / Accounting, Organizations and Society xxx (2015) 1e14 3
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in-house tax department is responsible for tax compliance: but it is
also likely to be responsible for tax planning e arranging the cor-
poration's transactions and interactions in ways that will minimise
its tax liabilities. Indeed e discussing the cyclical nature of tax
shelter activity e Braithwaite and Braithwaite (2006) note that tax
planning may go beyond tax minimization, and that corporate tax
departments can become pro?t centers, presenting ‘gaming’ with
tax laws as a business opportunity (see Rostain and Regan (2014)
for insights into the US tax shelter industry).
As a largely ‘hidden’ aspect of organizational and institutional
life e one that has received too little academic research attention e
it is important to clarify the nature and effects of tax activities in
this setting. It is important to understand that in-house tax pro-
fessionals play roles at three different levels of engagement e mi-
cro, meso and macro. In this we concur with Zeitsma and Lawrence
(2010) that focussing the analytic lens too tightly can lead to pat-
terns of activity being misunderstood or oversimpli?ed. Different
groups of actors co-exist at each of these levels, and have varying
degrees of in?uence e and different roles are played out at each
level (sometimes by the same actors adopting different identities)
ranging from the implementation of tax plans and associated
processes at the organizational level (micro), to developing and
setting standards of practice at the organizational ?eld level
(meso), to developing and enacting tax laws at the economic and
political level (macro).
The micro level comprises individual organizations, and the
primary actors here are their in-house tax professionals e the
leaders and executives within their tax departments e who are
charged with managing the organization's tax functions. These
include both compliance with the regulatory requirements of the
jurisdictions where the organization does business, as well as tax
planning e i.e., ensuring its activities are structured in ways that
will minimize its tax liabilities. These actors interact with other
organizational professionals as well as the Chief Financial Of?cer
(CFO) and Board of Directors. The questions we seek to answer at
this level are what is the role of in-house tax directors within their
respective organisations and what are the effects of how they
operate?
Moving beyond the organization, we dissect the external envi-
ronment into two levels, meso and macro. The meso e organiza-
tional ?eld e level is particularly important in terms of
understanding the tax arena. Kelly (2003, p. 613) suggests that
collective activity in reconstructing the practical implications of law
in organizational ?elds is more common than previously recog-
nized in institutional scholarship. For the purpose of this analysis,
the constituents of this group include professional institutes, in-
dustry and geographically based representative groups, external
tax advisers and auditors, (primarily Big 4), suppliers and com-
petitors, analysts and the media. It is important to recognize,
however, that for MNEs the notion of organizational ?eld is
considerably more complex than at a purely national level. At this
level “?elds are multiple, fragmented, ambiguous and inconsistent”
(Kostova, Roth, & Dacin, 2008, p. 998) and also includes organiza-
tions in these roles in other countries. At this level of engagement,
our questions are howdo in-house tax directors interact within the
organizational ?eld and what are the effects of how they operate?
At the macro level stands the wider external environment; the
overall economic and political level within which society's norms
and rules are established, and which “sets the dominant ideology for
the organizational ?eld to translate into organizational controls”
(Hopper &Major, 2007, p.56). The primary actors at this level include
government ministries and regulatory and legislative authorities.
The tax laws by which states extract revenue from multinational
companies are a source of tension resulting partly from the con?ict
governments face between the desire to enact tax laws that generate
suf?cient revenue to meet their needs, and tax laws that are ‘good for
business’ (and thus attract MNEs to operate in their countries, with
the attendant advantages for employment opportunities) while at
the same time achieving a wide range of social objectives. By and
large, political systems worldwide approve of, support and facilitate
companies' tax planning activities through, for example, the provi-
sion of speci?c tax incentives.
5
Other relevant actors at this macro
level of engagement are supranational bodies such as the OECD, IMF,
European Commission and NGOs, each of which have an interest in
tax policy and practice both within and across member states. At this
level, our questions are how do in-house tax professionals collec-
tively seek to in?uence the external environment and what are the
effects of such in?uence?
These three levels can be mapped onto Fligstein's (1991) insti-
tutional spheres namely “the existing strategy and structure of the
organization, the set of organizations comprising the organiza-
tional ?eld, and the state” (p. 312); although arguably ‘state’ is too
limited a construct to capture the dynamics of the macro envi-
ronment in an era of expanded transnational activities (Suddaby,
Cooper, & Greenwood, 2007). The actors and interest groups
operating at these three levels of engagement have different in-
terests, different sources of power and different audiences to whom
they must articulate their claims for legitimacy which ensures there
will be tension and controversy between them, and that their inter-
relationships will be dynamic, dialectic and recursive.
1.3. Methods
This study focuses on 15 MNEs in the information technology
sector. The headquarters of all our respondent companies are
located in the Silicon Valley area of California.
6
These US MNEs
operate in many jurisdictions throughout the world, 62 in the case
of one of the MNEs, and accordingly have many and varied tax is-
sues to address on a worldwide basis. Silicon Valley also provided a
geographically concentrated relevant sample of companies, which
facilitated an ef?cient scheduling of interviews.
7
Choosing these
MNEs was a deliberate attempt to seek out companies and in-
dividuals engaged in the subject being studied; i.e. “purposive
sampling” (Miles & Huberman, 1994, p.27). US MNEs invest heavily
in tax planning activities (Scholes et al., 2015), which incorporate
engagement with the external environment, and there is good
evidence to suggest this investment is economically worthwhile.
8
Importantly for the context of this study, as noted by Kenney
(2000), Silicon Valley “is indeed a rich prize for social science
theories” (p.1).
9
Focussing on one industry (IT in this study) facili-
tates more in-depth interviews: companies operating in the same
industry frequently face similar business and planning issues which
5
Although this has changed recently somewhat with the OECD Base Erosion and
Pro?t Shifting (BEPS) agenda which speci?cally designed to respond to allegations
of disregard by MNEs of national boundaries and their respective regulatory re-
gimes in their attempts to minimize global tax liabilities (OECD, 2015) .
6
Although one company has a Cayman Islands-based tax structure. In this
context it is interesting to note Hines' (1999) point: “It is striking that, in spite of the
appeal of low tax rates, very few multinational ?rms actually relocate their
corporate homes to tax havens. In part, this re?ects the tax and regulatory costs of
doing so, but in part, it also re?ects the unwillingness of governments to impose
excessively heavy tax burdens that encourage widespread departures.” (p.313).
7
See Suchman and Cahill (1996) also for a qualitative study focussing on Silicon
Valley area.
8
Mills, Erickson, and Maydew (1998), examining the tax related expenditures of
365 large US corporations, estimate that (on average) they save $4 for every $1 they
spend on tax planning.
9
See Kenney (2000) for a discussion of the history of Silicon Valley, and some
observations and explanations around critical institutions and organisational rou-
tines for the region.
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have to be managed from a tax perspective, so this limited focus
provides insights into the commonalities (or otherwise) of why and
how such companies engage with their external environment and
the implications for their subsequent tax planning activities.
Table 1 presents some background facts on all ?fteen companies
involved in this study, covering the nature of their business, turn-
over, number of employees and so forth. This is a diverse group of
companies in terms of turnover, number of employees, age and
worldwide presence.
Face-to-face interviews were carried out with 26 tax executives
fromthese 15 companies. These executives were almost all heading
up the worldwide, US, or international tax function in their
respective organisations from the US. Notably, three of the in-
terviewees hold senior VP positions, The higher the level/position
held in an organisation by the head of tax, the more embedded the
tax function is likely to be whereby one's position and status is a
source of power within the organisation. Job titles held by the tax
executives included: Senior Director of Taxes, VP Tax and Trade, VP
Tax, VP Tax, Licensing and Customs, International Tax Director,
Director, US International Tax and Audits, and Senior VP Taxation.
These interviewees were all part of the ‘elite’
10
set of tax executives.
1.3.1. Data collection
Our primary research method was face-to-face interviews with
tax executives of 15 Silicon Valley IT companies, conducted by one
of the authors during 2005, subsequent to the Enron scandal, but
predating the ?nancial crisis.
11
In terms of Ahrens and Chapman
(2006) observation that interviews can be used with different
methodologies “depending on the notion of reality they are sup-
posed to explore” (p.4), we use them here in line with a construc-
tivist notion of a social reality of tax planning in MNEs. The
interviews enabled us to focus on how the tax executives construct
and understand their experience and thereby work towards un-
derstanding the social reality of the world in which they operate.
The interviews were in-depth and semi-structured giving us some
?exibility and spontaneity and allowing the interviewees “a degree
of freedom to explain their thoughts” (Horton, Macve, & Struyven,
2004, p.340). The interview schedule, used to guide the interviews
was informed by tax planning literature, potential theoretical un-
derpinnings (including new institutional sociology) and by sec-
ondary research conducted on the MNEs participating in the study
and on some topical international tax planning areas. Questions
contained in the interviewschedule revolved around themes which
included: background and organisation of the tax planning func-
tion in the company, tax and strategy, the importance of the tax
function within the company, the interplay between tax and ac-
counting, outsourcing, the role of tax advisors, technical approach
to tax planning, the external in?uences on the company's overall
Table 1
Companies' details.
Company
code
Business description Headquarters Year
founded
Auditors Stock
exchange
No. of employees No. countries
(excl. US)
Turnover ($)
C1 Manufactures computer products and
develops software
Cupertino CA 1970s 1970s
Big 4
Nasdaq 10,000e15,000 10K* 6,000me12,000 m
C2 Provider of services and equipment
for semi-conductor industry
Santa Clara CA 1960s Big 4 Nasdaq 10,000e15,000 18 6,000me12,000 m
C3 Provides consumers and advertisers
with information retrieval products
Oakland CA 1990s Big 4 Nasdaq 500e1000 6 Less than 1,000 m
C4 Provider of internet Marketplace San Jose CA 1990s Big 4 Nasdaq 5000e10,000 26 3,000me5,000 m
C5 Technology solutions provider Palo Alto CA 1930s Big 4 NYSE In excess of 75,000 62 30,000me80,000 m
C6 Semi-conductor manufacturer Santa Clara CA 1960s Big 4 Nasdaq In excess of 75,000 10 30,000me80,000 m
C7 Manufactures disk drives San Jose CA 1980s Big 4 Nasdaq 10,000e15,000 15 3,000me5,000 m
C8 Developer of network administration
and security software
San Jose CA 1990s Big 4 Nasdaq 1000e3000 16 Less than 1,000 m
C9 Enterprise software Redwood CA 1980s Big 4 Nasdaq 40,000e50,000 58 6,000me12,000 m
C10 Developer of sales and marketing
information software
San Mateo CA 1990s Big 4 Nasdaq 3000e5000 31 1,000me2,000 m
C11 Content and network security s/w,
it consulting and training
Cupertino CA 1980s Big 4 Nasdaq 5000e10,000 30 1,000me2,000 m
C12 Developer of design automation
software for integrated circuits etc
Mountain View CA 1980s Big 4 Nasdaq 3000e5000 21 1,000me2,000 m
C13 Manufactures programmable devices
and provides design software
San Jose CA 1980s Big 4 Nasdaq 1000e3000 14 1,000me2,000 m
C14 Scienti?c instruments and vacuum
technologies
Palo Alto CA 1940s Big 4 NYSE 3000e5000 15 1,000me2,000 m
C15 Man:storage devices and provides
storage related software
Scotts Valley,
CA, (Cayman
Islands based)
1970s Big 4 NYSE 40,000e50,000 18 6,000me12,000 m
*Only Ireland and Japan listed.
10
We consciously use the term ‘elite’ here to designate a select group of actors
whose knowledge, abilities and power set them apart from their peers (as distinct
from the more political connotations of the term used to designate an outcome of
the class system, for example in the UK e see Williams (1988).) These tax pro-
fessionals are ‘elites’ due substantially to the seniority of their position within their
respective companies, the highly specialized nature of their expertise and the high
level access they can secure to senior and in?uential government of?cials, repre-
senting power beyond economic power. Indeed they also satisfy many of the
criteria of elite standing identi?ed by Odendahl and Shaw (2001) including a shared
set of attributes and values. This elite tax community is akin to some of the tax
‘elites’ interviewed by Tuck (2013). Powell (1991), recognising “the exercise of
power” as an avenue of institutional reproduction asserts that “[e]lites may be both
the architects and products of the rules and expectations they have helped devise”
(p.191) which is demonstrated in this paper with respect to these tax professionals
(See Aguiar and Schneider (2012) book entitled ‘Research Amongst Elites’ for
further evidence pointing to tax professionals being ‘elites’.).
11
Notably the interviewees were active members of some of the various tax
representative groups operating at the meso level referred to later, for example, the
Silicon Valley Tax Directors Group, the Tax Executives Institute and the High
Technology Tax Institute. Whilst being a member of these groups shapes the in-
terviewees' perspectives, interviewees were not speaking directly on behalf of
these groups. Interviewing the executive membership of such groups and indeed
other members of the meso and macro levels would be a valuable extension of this
study, but the focus of this study was very much on the in house tax executives own
account of how they operate.
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approach to the practice and process of tax planning, networking
among tax professionals, and key regulatory bodies/participators
in?uencing tax policy. Interviewees were informed of these themes
in advance of the interviews. Some interviewees sent emails to the
interviewer following the interview to provide further information
and/or clarify some point made during the interview. Throughout
the course of the interviews, patterns emerged and some probes
became more appropriate than others in the context of stories
around the main themes of enquiry emerging. Importantly, through
this process, ‘the validity of responses is to some extent con?rmed
by their consistency among different interviewees, which enabled a
reasonably coherent overall picture to be developed’ (Horton et al.,
2004, p.348).
We also examined each of the last 10K
12
reports ?led by each
company prior to the interviews. These reports, which include
?nancial statements, provided important contextual documentary
information on the nature of the company's business, the countries
in which it had a physical presence, the identity of its auditors and
so on. While examining ?nancial reports can yield some valuable
information on companies, they do not give real insights into their
tax situations, their approaches to tax management or details about
howthey interact with their external environments e as one of our
respondent tax executives (TEs) pointed out: “I better be careful
saying this on tape but ?nancial statement disclosures are no more
transparent today than they were before. You could not tell what
we're doing.”(TE 14). We also examined the companies' websites,
recent company press releases, press comments, and internet
accessible executive biographies of the interviewees.
1.3.2. Data analysis
All interviews were recorded and written up immediately af-
terwards, noting the tone of the interview, overall impression
formed, and any other signi?cant observations.
13
The interview
transcripts, post-interview notes and email correspondence from
interviewees before and after the interview amounted to a signif-
icant amount of data for analysis. Our data analysis involved pro-
cesses of reduction, classi?cation and interpretation (Lillis, 1999)
which facilitated making sense of our large volume of data (Patton,
2002). We used QSR NVivo to assist our data management and data
interrogation and analysis (Mulligan, Cunningham, & Gawley, in
press), and it also provided a form of ‘audit trail’ (Bringer, Halley
& Johnson, 2006). However, as with other qualitative data anal-
ysis software, as noted by O'Dwyer (2004, p.395), it ‘is merely a tool
designed to assist analysis’. Our coding, a formof ‘ongoing, iterative
re?ection’ (Miles & Huberman, 1994, p.56) started with us using a
number of codes initially based on the themes addressed in the
interview schedule. Upon reading all of the documents again, new
codes were created (for example, Information Sharing, Power, Rela-
tionship with the IRS) and others eliminated (for example, Tax as a
pro?t centre, Outsourcing) as deemed appropriate. This exercise was
critical in ensuring we gave ‘voice to the informants’ in the early
stage of analysing the data and ‘to represent their voices promi-
nently in the reporting of the research’ (Gioia, Corley & Hamilton,
2013). The focus here was to allow the story of the data to
emerge in its ‘raw’ state without much concern for theoretical
insights.
Following the coding process, we read and re-read the coded
reports and started the process of extracting the richest and most
appropriate quotations, bearing in mind our objective to unfold the
nature of the relationship between these in-house tax professionals
and the external business, tax and regulatory environments within
which they operate. This was followed by further analysis, now
drawing on the theoretically relevant constructs from institutional
theory, endogeneity of lawand power. At this stage, it became clear
that the richness of the story is in the understanding of how these
tax professionals co-exist with other actors at the micro, meso and
macro levels of engagement. The ?nal stage of data analysis was to
categorise the voices of the informants and theoretically informed
insights from the ?nal themes, across these three levels of
engagement. This is presented in the next sectionwhich is followed
by further detailed consideration of the way in which the tax pro-
fessionals engage in institutional work to subtly in?uence and ex-
ercise their power on the regulatory environment.
2. The institutional work of in-house tax professionals
The tax professionals working in large US based MNEs are
mostly quali?ed accountants or lawyers, many having trained with
and worked for one of the Big4
14
international accountancy prac-
tices or a large legal practice: some also hold Masters in Tax or MBA
degrees. So they are a group of knowledge experts, likeminded
individuals, who understand each other's perspectives, are simi-
larly trained and may knoweach other fromprior work experience,
providing social capital, and potentially constituting an epistemic
community (Davis Cross, 2013; Haas, 1992) or moral community
(Shadnam & Lawrence, 2011).
2.1. Micro level: intraorganization
At this level of analysis, we are interested in understanding the
role of in-house tax directors and their relations with other actors
within the organization, how they operate, the degree of
embeddedness of the tax function, its perceived importance in the
wider organization, the power of the tax department along with
the effects of this power, and the ways inwhich the role is changing.
Viewing the organization as a sub ?eld (Bourdieu, 2005) in which
struggles take place over valuable capital, allows us to better un-
derstand the position of the tax function in terms of its dominance
or subordination, re?ected in the extent to which tax consider-
ations drive organizational strategy. While there is evidence to
suggest that the tax function tends to be more embedded in larger
organizations (Rego, 2003), we found the degree of embeddedness
depends on a range of factors from the attitude of the CFO, to size
and change in pro?tability levels, to increasing risk levels arising
from international expansion, to a changing regulatory environ-
ment and the extent of integration processes. In particular, the
higher the level position the head of tax holds in an organization,
the more embedded its tax function is likely to be. Having a VP Tax
in place, regardless of the exact nature of their activities or real
powers, indicates that the company takes tax matters seriously, and
so is a source of symbolic capital.
Our study revealed some variation in the wider organization’
perceptions of the importance of the tax department i.e. its position
within the organizational sub ?eld. Some informants were not
convinced that the tax function was highly valued within the orga-
nisation e TE 25, for example, thought it would be viewed as “being
12
Form 10K is the annual report that publicly quoted companies ?le with the U.S.
Securities & Exchange Commission: it provides a comprehensive overview of the
company's business. We did not undertake a systematic content analysis of these
reports, but they nonetheless provide valuable background information that was
used to enhance the interviewing process.
13
For example, some individuals were keen to distinguish his/her company from
others in Silicon Valley using phrases like: ‘we are different’, ‘maybe other com-
panies don't do it this way’, ‘SOX may have changed things for other companies, but
not for us’.
14
‘Big 4’ is the collective term commonly used to refer to the largest four inter-
national accountancy practices, namely, PWC, KPMG, Deloitte and Ernst & Young.
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slightly academic and technical and something that happens in the
background”: he was not con?dent that a lot of people in the com-
pany understand its tax structure, nor that “the tax people have ever
gone out of their way to explain it, it's sort of on a need to knowbasis
almost”. Much of a large organization has no need to engage directly
with the tax function, which makes it easy for tax professionals to
retreat into the shadows, which sometimes happens. However, there
is a growing trend towards involving tax executives up front in
organizational decision-making, partly driven by those professionals
pushing themselves forward over time and so becoming more
engaged with the business. This increasing prominence is also driven
by the fact that these companies are operating in so many different
countries that their tax risks are greater:
I do think that the message is getting [across] loud and clear that
tax is a key player and especially as we expand internationally,
there is a lot of concern about taxes, there is a lot of concern
about the structure that we have and so the groups tend to
involve me a lot more early on. (TE 2)
Education by the tax department of new staff in the business
units was identi?ed as critical:
In-house executives have a role to educate others within the
company of the importance of tax for us e it's a constant re-
education process of every new person that comes in to a busi-
ness unit because they're usually coming from a small failed
dot.com where they've been a VP d and I'm sure you've heard
this one before you know with their Harvard MBA and they had
two plus years in the defunct company and then they come here
and they're very used to going by the seat of their pants and we
don't function that way. So it is our job to educate and evangelize
for the tax department in the different business units. (TE 7)
This particular quote highlights the importance of alignment
between professional habitus and the organisational sub-?eld, and
the need for realignment in the event of mis?t. Some of the in-
terviewees have been employees of their respective organisations
for a very long period of time and TE 2 recognised the value of the
knowledge of the business and structures which himself and his
boss built up over the years
15
: “Something that most companies
don't value enough is institutional knowledge. It's not something
that you can replace. You either have it or you don't”. Such insti-
tutional knowledge, a source of cultural capital, coupled with long-
term internal business relationships provides a rich internal source
of power which helps the pro?le of tax within any company, and
therefore the capacity of tax executives to in?uence decision
making and effect change.
We ?nd evidence of distinctive tax cultures linked to the
importance the organization attributes to tax function. The CFO has
emerged as one of the most powerful organizational actors in terms
of tax being seen as an integral part of how MNEs do business.
Being very well positioned to engage in the necessary political
processes associated with the institutionalisation of tax, the CFO is
a key player in setting an organization's tax culture, so the intro-
duction of a new CFO can lead to its deinstitutionalisation and/or
reinstitutionalisation; lending support to the notion that institu-
tionalization is always an ongoing process.
Many informants described the company's tax strategy in terms
of its overall goals and objectives: common among these across the
companies were legally minimizing companies' effective tax rates,
looking for opportunities to lower taxes further, tax lawcompliance
worldwide, keeping out of trouble (with tax authorities), and being
responsive to such internal ‘customers’ as, fellow professionals in
accounting and human resources. There was general agreement
that a tax strategy should not drive the business, but that, “the
business should drive tax and company tax strategies” (TE 14). TE 5
believed “the tax tail shouldn't wag the operational dog”, while TE
15 observed “we can't have the business behaving in an aberrant
way just for tax purposes”, and TE 10 was keen to point out “we are
not an Enron where we view tax as a standalone function that
should be creating its own planning and savings, tax is an adjunct to
the business”.
16
This latter reference demonstrates the heightened
sensitivities among tax professionals following the corporate
scandals and subsequent US government response, such as the
enactment of Sarbanes Oxley legislation,
17
which spotlights inter-
nal control processes.
The size of MNEs in-house tax departments (in terms of staff
and other resources) varies, as does their relative importance, and
the extent to which they are integrated or embedded in those or-
ganizations. While their size depended on both internal and
external factors, size and complexity of the company and the
amount of resources a company is willing to put into the tax
function, and the increasing demands on tax departments arising
from the changing regulatory environment, were the recurring
determinants referred to by our interviewees. The constitution of
in-house tax departments tended not to be static, and tax team
numbers ?uctuated over time. In the US, there tends to be
considerable movement of tax professionals between in-house
roles and positions in public law and accounting ?rms (at this
level, generally Big 4 companies) or the revenue authority (IRS)
(Borkowski, 2005). We also found evidence of MNEs taking a
strategic attitude towards recruiting ex IRS of?cials and ex partners
from accounting and law practices, with the latter in particular
being well positioned to “orchestrate the company's efforts” in the
endogenous process of tax law making (Suchman & Edelman,
1996), and manage external impressions of the companies
(Covaleski et al., 2005) e for instance, Byrnes and Lavelle (2003)
refer to companies building “powerhouse tax departments staffed
with former government tax experts”. TE6 emphasised these ex-IRS
of?cials ‘had the relationships that were needed’,
18
and the com-
panies certainly do value and use these relationships, a form of
social capital. In the context of IRS of?cials moving to tax practice,
as opposed to industry, TE 14 sees them being hired:
…because of their ability to get things done. They have channels
inside of the IRS but they also know the inner workings, what is
it that makes the IRS click? What is it that makes the IRS do what
they do?
Similarly TE 15 referred to the hiring of their two ex-IRS econ-
omists, to bring the perspective of the ‘other side” and importantly
15
One tax executive for example was with his company over 18 years.
16
For more detailed ?ndings and discussion on the relationship between tax and
business strategy, see Mulligan, E., Cunningham, J. & Gawley, J. (forthcoming).
17
Sarbanes Oxley established new/enhanced standards for all US public company
boards, management, and public accounting ?rms. It also established a new ‘quasi-
public’ agency, the Public Company Accounting Oversight Board (PCAOB), also
referred to by many of the interviewees. This Board is charged with overseeing,
regulating, inspecting, and disciplining accounting ?rms in their roles as auditors of
public companies. Interviewees were particularly exercised about s.404 of SOX
which requires management and the external auditor to report on the adequacy of
the company's internal control over ?nancial reporting. The latter therefore, re-
quires documenting and testing important manual and automated controls with
respect to tax.
18
The implications for the IRS from losing such personnel warrants further ex-
amination but is not relevant for this study. There is also movement into the IRS
from practice, but this was not explored in detail in the interviews.
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“they'll ?ght themwhen they step out of line …and they step out of
line a lot”. Also, hiring economists could re?ect what Meyer and
Rowan (1991) refer to as “[t]he rise of professionalised economics
…econometric analyses help legitimate the organization's plans in
the eyes of investors, customers …and internal participants” (p.51).
With economists on board, for example, it becomes more dif?cult
for tax authorities to challenge decisions such as transfer prices,
which are a particular source of con?ict.
Within the organizational sub-?eld, the in-house tax pro-
fessionals’ role and power is conditioned by the organizational
doxa. Agency in terms of strategic responses to institutional pres-
sure is constrained, some professionals will lean towards acquies-
cence to regulatory requirements as a way to stay under the radar,
keep out of trouble. Others will lean towards avoidance, giving an
appearance of acquiescence and disguising non-conformity with
regulatory expectations.
2.2. Meso level e inter organizational relationships
In this context, the organizational ?eld is the level at which
attempts to secure, or to resist, institutional change are most
visible, bridging the micro and macro levels. Here we are interested
in how in-house tax professionals interact with one another and
with other actors in the ?eld, and the effects of such interactions.
Two actors in particular are relevant at this level e market analysts
and professional organizations e although there are other signi?-
cant players (such as the media), which are beyond the scope of this
paper.
Market analysts exert meso level in?uences on MNEs' tax
practice through their evaluations of ?rm performance, which in-
?uence Boards' perceptions about tax, and also puts pressure on
CFOs e as well as issuing commentaries which impact MNEs' share
prices. They are particularly interested in companies' effective tax
rates ewhat rates they should use for their modelling purposes and
why, and why they might differ from their competitors' rates.
When a CFO has to deal with analysts' questions about their com-
pany's effective tax rate, tax is pushed onto their agenda.
Importantly, in-house tax executives interact frequently with
their counterparts in other organizations via their professional as-
sociations. Such bodies articulate a collective voice for their ?eld,
which can then be relayed to the macro level with the clear
intention of in?uencing the regulatory environment to the advan-
tage of the organizational ?eld as a whole, but also of its individual
organizations (some more than others). Professional institutes and
organizations were clearly very important external in?uences (as
sources of normative and coercive isomorphism) on all of our in-
formants. Equally some informants seek to, and are able to, heavily
in?uence the work and agenda of the institutes. Some professional
institutes (for example the Tax Executives Institute) have a tech-
nical tax focus across a broad range of sub-industries within the
sector (IT in this case) and provide signi?cant educational, and
networking and lobbying platforms. Others e such as the Silicon
Valley Tax Directors Group
19
is a more select group representing
high technology companies, which concentrates on making very
signi?cant lobbying efforts, while others e such as the American
Electronics Association e cover particular IT sub-industries. All
these various groups provide their members with valuable
networking opportunities, but each one also provides something
unique e all of them are clearly important constituents of the
organizational ?eld enabling their members to operate and have
impact across the meso level. Some of our informants were more
actively involved in running these institutes and setting their
agendas e for instance, our informants included the present and
past presidents and board members of the Silicon Valley Chapter of
the Tax Executives Institute, and one was the former head of the
international Tax Executives Institute.
This paper opened with a quote from one of the Silicon Valley
tax executives describing a counterpart in another organization. He
continued his story by saying “He says ‘well I'm not interested in
just being a member of an organization; I want an organization that
I can in?uence to represent the best interest of my company’” and
that is probably not an isolated viewpoint:
So, you know, where you think there's this so called supportive
tax community, there are a number of people who are that way
but there are a number of organizations who are participating …
. solely for the purpose of advancing their own company. (TE 23)
2.2.1. This further underlines agency in action at the organizational
?eld level
The in-house tax executives interviewed were well attuned to
who were members of the tax professional community and their
respective social capital. TE 11 referred to his VP Tax being “fairly
well known in the tax circles”, and described a key player in the
High Tech Tax Institute as “a real mover and shaker in the tax
community”. TE 18 described the tax community in Silicon Valley as
being “a very robust tax community, very, very”, while TE 12
referred to using it as a “private network” when researching the
best tax plans and structures, perhaps in preference to formally
engaging external advisors such as specialist tax service ?rms.
There is a signi?cant power effect at play here whereby information
on tax plans diffuses across companies, often resulting in imple-
mentation and gaining credibility.
2.2.2. Information sharing
The level of information sharing between executives in collab-
orating and competing MNEs is particular to tax executives, even
within the Silicon Valley area, and there appears to be ‘leaders’ and
‘adopters’ of tax plans co-existing happily within this area. This
suggests tax is still a ‘black box’ business item, even if (as noted
earlier) it has become more visible in the recent, post-corporate
scandals, environment
20
. Sharing information, particularly about
tax plans and technical advice about dealing with ambiguities in
tax laws serves to provide legitimacy to preferred tax positions,
yielding a form of power for these companies when taking tax
positions in dealing with Revenue Authorities. This essentially
amounts to a risk management strategy as well as (as it always
does) giving those involved a greater sense of social legitimacy
among trusted network contacts and beyond. TE 9 explained how
this information sharing works between competing companies:
I have known the people at [named company] and [our VP Tax]
has known the tax people at [that company] for twenty years or
more …there is a lot of history there and there is a lot that we
can share … there can be sensitivities too because we are a
customer of theirs and sometimes the business relationships
between companies like [ours] and [theirs] or [with another
named company] for example, major suppliers to [us], there can
be real tensions in those relationships about contracts and
19
The companies represented by this group are dependent on research and
development in order to remain on the cutting edge of technology innovation and
to compete in the international market place.
20
Clearly this has now changed even further and in current times we ?nd
corporate tax plans open to considerable scrutiny in the public arena.
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prices and stuff like that. But on the tax side we generally seem
to be able to put that aside.
Clearly, the specialized nature of the expertise involved allows
these in-house professionals to operate outside of the normal rules
of the commercial con?dentiality game, further evidence of their
‘working in the shadows’. This is not to say there is full and frank
disclosure between them e caution is still necessary to ensure
commercially sensitive information remains con?dential. As one
respondent observed: “there is a limit to how far you can go …it's
touchy, you have to be careful …you can't talk about pricing at all,
no pricing, no market shares, any of that kind of stuff.” (TE 5).
Not all tax arrangements are shared with other ?rms e one
informant explained why he would prefer to keep some tax plans
out of the network: “sometimes you wish they wouldn't take it
public … because it's a good idea and you don't want anybody to
know about it.” (TE 22) This suggests that at times, if too many
businesses engage in tax planning which was not intended by the
legislator, but has now become common practice, it effectively
forces the Revenue Authorities to deal with it, perhaps through a
change in legislation e otherwise Revenue may well choose to
ignore it. It is clearly within the interests of companies to try to
contain such tax planning ideas within a limited group.
The Silicon Valley Tax Directors Group gets together once a
month and
shares problems, concerns …and that is where a lot of sharing
takes place. There are competitors in that group, one guy in
particular who I have known for years is good about calling and
asking, for example, what have you done in France on this
particular issue. (TE 3).
The group, which only has 38 members
21
e the largest com-
panies in Silicon Valley, facing many of the same issues e facilitates
the sharing of information in a more focused and relevant way:
if you've got $500 million in sales you know you don't have time,
you don't have the resources and your issues generally aren't as
complex. So you're really looking at companies like you know $1
billion and plus or $2 billion and plus. Well there's probably only
30 of those …the guy at a start up he's got different problems you
know. He's trying to ?gure out how to ?le his tax returns … to
make sure he meets payroll and …if you had the top 30 Silicon
Valley companies involved, if you had [named four large Silicon
Valley based companies] … well you know as you get further
down their issues …there just isn't as much to share. (TE 14)
This suggests that companies’ tax priorities differ according to
their size and the larger companies, as members of the Silicon
Valley Directors Group present as very powerful and are prepared
to share information on tax matters to enhance this power further.
2.2.3. Links to higher education
The High Technology Tax Institute (based at San Jose State
University) is also in?uential in facilitating education, networking
and information sharing, as well as e rather exceptionally e
engaging academics in tax practice. The Institute is a well-
respected forum in Silicon Valleyemany of our informants have
presented at its conferences or sat on its advisory board. “It's really
very good and because it's here in Silicon Valley it doesn't cost very
much money” (TE 16). Attendance at the various educational
seminars and conferences hosted by such bodies facilitate
networking among tax professionals. One informant (commenting
on Tax Executive Institute seminars) said: “ [they are] good for
networking, just because you're seen, the people in the Valley here
are going to go to them.” (TE 7), while another noted: “it's inter-
esting to see, just by how many people attend, how hot a topic is.”
(TE 19). This highlights how these in-house professionals have to
engage with and keep abreast of the constantly changing tax rules
and regulations. Another described the workings of this elitist
network of tax experts in the following terms:
we're on a number of tax mailing lists where tax, leaders of tax
groups communicate. So if there's an issue that you know one
big company has come out with they sort of hop it out and it
goes to the top tax guys at big companies … so there is a fair
amount of communication among the Tax Directors sort of cir-
cuit as to you know current issues that are going on. (TE 16).
The combination of networking, relationship building,
continuing education, dissemination of research ?ndings and
sharing of information generally apparent among Silicon Valley tax
executives, all facilitated through the workings of various repre-
sentative institutes and organizations (members of the organiza-
tional ?eld) constitute multiple isomorphic pressures (Edelman &
Suchman, 1997). This explains the origins of the homogeneity
(DiMaggio & Powell, 1991) of the tax plans, prevailing industry
practices (Suchman & Edelman, 1996), processes within these
companies and power effects. The roles played by the various in-
stitutes, combined with consideration of the language e terms like
“tax circle”, “tax community” and “social clubs” were regularly used
by our interviewees e suggests the existence of “networks of po-
wer” in Silicon Valley with respect to tax (Edelman et al., 1999;
Suchman & Edelman, 1996). The intensity of the social interaction
(through both formal and informal fora) between these Silicon
Valley based tax executives results in a social reality very peculiar to
the tax world of these companies. This professional network, which
spans across these Silicon Valley companies, also provides a vehicle
for the rapid diffusion of new practices between them (DiMaggio &
Powell, 1991).
At this level the tax professionals are to some extent freed from
organizational structures and their relational, third dimension
(Lukes, 2005) power in the organizational ?eld derives not only
from personal attributes but also those of the organization that
they represent. Some, but not all, of these professionals will engage
in manipulation; shaping values and criteria that are then taken
back into the organization to varying degrees through mimetic
processes.
2.3. Macro level e relations with wider environment
This ?nal section analyses the positioning and roles of in-house
professionals e individually and collectively e in the wider social
and political environment. Here we examine relations between
organisations and the IRS as an organ of the state, but also the wider
regulatory environment. Here, the state creates a “complex,
ambiguous and uncertain legal environment that organisations
must monitor and negotiate” (Kelly, 2003, p.611). We ?nd more
overt evidence of tactics (Oliver, 1991) designed to in?uence the
regulatory framework within which the in-house professionals
operate.
The technology sector in which Silicon Valley companies operate
is changing rapidly in terms of technologies, geographies, mergers
and acquisitions, and ways of doing business, all of which give rise to
new tax obligations and opportunities. Some companies, for
21
It had 38 members when these interviews were conducted. In May 2015 it has
81 members.
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example, have recently made their ?rst entries into the retail market,
and selling direct to the consumer e whether through a shop or via
the internet e means there are new tax implications to be examined
and managed. Operating in non-US jurisdictions also throws up
particularly problematic and costly issues: one informant spoke of
signi?cant clashes between his company's business model and the
local tax regimes in China and Singapore. Indeed, one signi?cant
challenge for in-house tax professionals is how to respond to the
increasing uncertainties about tax legislation stemming from some
national ?nance ministries adopting strategies to deal with com-
panies' ‘creative’ tax planning: in the US, for example, these include
‘naming and shaming’ as well as civil prosecutions.
One of the key actors at the external environment level is the
revenue authority. Relationships with our interviewed Silicon
Valley tax executives and the US authority e the Internal Revenue
Service (IRS) e were complex and nuanced, but nonetheless were
much valued by in-house tax professionals and needed to be
carefully managed. One noted:
we never get confused as to where our loyalties lie and what our
responsibilities are …we don't let the tax authority governwhat
we do, they are not our boss but still they are important …there
are certain things you could do that would do so much harm to
that relationship relative to the bene?t you got from it, that you
don't want to do it. (TE 9).
Another informant highlighted an important tension in the in-
house tax professional's role e of acting in the interests of the or-
ganization which engaged them, but still having a professional
obligation to maintaining the overall integrity of the tax system:
I want to develop a good relationship with the IRS so I will never
do anything, which would jeopardize because it's not my money
right. I want to do the right stuff for the company and for the
government … [I think of myself as] like a semi government
agent. (TE 13)
Another informant stressed the coercive power of the ?scal
authority: “the positions that [the ?scal authorities] take, how they
enforce the laws [have] a huge impact on what we do”. (TE 5)
Arguably the ?scal authorities are engaged in symbolic violence
(Oakes, Townley, & Cooper, 1998), using their symbolic power to
exert in?uence in the ?eld (Gracia &Oats, 2012), a ?nding that runs
contrary to some other accounts of the superior power of MNEs vis
a vis the tax authority (for example Morrell & Tuck, 2014).
Many interviewees referred to having ‘good’ relationships with
the IRS. One described the process of IRS of?cials coming to trust
him and his team over time, highlighting an important temporal
dimension e the importance of developing relationships, i.e.
building social capital, over time with other tax professionals (even
from the IRS):
It's an interesting process, … they usually come in, very suspi-
cious e here is a big company, lots of income, there must be
something bad going on. When they get into it and they realize
that we try to do a reasonable job, we will be a little bit
aggressive in certain areas, ?ne, we are not going to hide it from
themand we develop a working relationship where we can have
…conversations on …technical issues, because that is more fun
… it's not contentious on our part … the whole relationship is
good but there are individual issues that can get pretty heated.
(TE 3)
This underscores the complexity of corporate tax practice as an
institution. Specialised knowledge etechnical, as well as abstract e
is not only held by in-house tax professionals to be provided as a
service to their commercial employers: regulatory authority agents
have similar, but not necessarily identical, knowledge bases, and
the two are brought into play in the negotiations, confrontations
and consensus building interactions between the regulator and the
regulates (Lange, 1999). This is consistent with Kelly (2003) who
found that notwithstanding the apparent concreteness of law,
interested actors were able to work with the regulatory agency to
“reconstruct the practical meaning of the law” (p.617).
Having a ‘good relationship’ with the IRS (and tax authorities in
other jurisdictions) stems particularly from a concern for building
credibility with the State (Carruthers, 1995) and maintaining a
position within the ?eld. We ?nd speci?c evidence to support the
idea of the endogenisation (Edelman & Suchman, 1997) of the IRS
audit process within MNEs' tax management, a process which,
arguably, supports the illusion of the ?eld. We found that IRS of?-
cials and tax executives frequently attended the same conferences,
which therefore provided them both with opportunities to build
good communications (Wilson, 1995) and so develop and maintain
what they clearly both see as important, recursive relationships.
Having canvassed the structure and power relationships within
which in-house tax professionals operate, observing the way in
which strategic responses play out differently at the different levels
of analysis, the next section considers in more detail the way in
which these actors engage in institutional work to subtly in?uence
and exercise their power on the regulatory environment which
enables their practices but also constrains them.
3. In?uencing the regulatory environment
We found that in-house tax professionals working in large
multinational organizations operated in a highly complex and
heavily regulated environment. It is tempting to assume they are
passive recipients of regulatory edicts with which they have no
choice but to comply (Meyer & Rowan, 1991), but this would be a
dangerous over simpli?cation that can obscure how tax policy is
made and effected in society (Baker, 2005; Covaleski et al., 2005;
Gramlich & Wheeler, 2003). As Oliver (1991) suggests, organisa-
tions don't blindly mimic but adopt various tactics to achieve
workable compromise. Importantly, here the strategic tactics are
not those of the organization as a whole, but individual actors
within a speci?c organizational function. In house tax directors are
actively engaged in institutional change, either individually e by
taking direct action on behalf of their speci?c employers, or
collectively via their professional representative organizations. We
found many of these were heavily involved in lobbying, a form of
interplay between organizations and legislators that has been
described as a “highly endogenous and reciprocal” relationship
(Suchman & Edelman, 1996, p.938) resulting at times in a softening
of regulations that counter corporate interests (Edelman et al.,
1999), or in the bringing forward of new ones that serve those in-
terests. These representative groups and their members could
never be accused of being passive pawns (Scott, 2008a) when it
comes to tax laws, and their lobbying activities employ both sym-
bolic and social capital (Bourdieu, 1986; Covaleski et al., 2005), and
can be seen as strategic responses (Oliver, 1991) which are carefully
orchestrated, thereby making tax professionals very active players
in the construction and con?guration of tax laws (Edelman &
Suchman, 1997).
We also found evidence of the exercise of power and in?uence
at both the institute level and by certain individuals e typically,
long standing Senior Tax VPs of the largest companies, the elites of
the Silicon Valley tax community e driving agendas within those
institutes. Some of these individuals appear to use the ‘clout’ of
their representative groups purposefully e and even craftily e to
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serve their own organizations' interests ewhich, of course,
frequently align with those of many other Silicon Valley companies:
since many of themoperate in the same business contexts and thus
face similar tax challenges, this homogeneity with respect to tax
plans and practices is hardly surprising. This “power-play” is
important (Scott, 2008a), and the level of respect and extent of a
hearing that these representatives and individuals appear to
receive from key decision makers e right up to Congress level e
calls into question the success of state regulations as engines of
coercive isomorphism (Scott, 2008a). There is also evidence of an
endogenous relationship extending to compliance and standards,
with one company (at least) being consulted by Financial Ac-
counting Standards Board e the US body that sets accounting
standards e for assistance in developing one of its position papers.
Lobbying is at the forefront of the Silicon Valley Tax Directors
Group's activities, and is funded by its relatively high annual
membership fee ($10,000, compared to a mere $200 for the Tax
Executives Institute). As one informant observed.
It's the lobby fees. They're not trying to make money. What
they're having to do is pay the person in Washington DC that
will take their lobby message to whoever it needs to go to …
they represent some huge companies and Washington listens to
huge companies. (TE 14).
Being able to demonstrate empathy with their position, and
recognizing that there is some element of trading in the process of
in?uencing regulatory authorities, is extremely important. One
informant emphasized the importance in the ‘game’ of not just
going to Congress in times of need:
There are times when we will assist the legislature and the IRS
on regulatory matters but it might not be something we really
care about. You can't just go to Congress when it's really
important to you e they want to see you there all the time. (TE
8)
A number of these companies have appointed external affairs
personnel, usually based in Washington DC, with whom company
tax executives are in regular contact, and whose brief it is to lobby
for particular tax policies and object to others. These agents are
regarded as powerful and political:
That's one of the banes in the US you know … a small circle of
corporations or other individuals have so much in?uence in
getting tax laws enacted: those laws affect us all but they're in
place to optimize the positions of a few organizations … that's
how the game's played and you've got to accept that to some
extent if you want to be in that arena … I'd say there's maybe
four or ?ve companies in this Valley that shape legislation
because they're focused on it, they're bright companies and
they've got the resources. (TE 23)
So many of these companies liaise directly with politicians at
Washington DC in relation to federal tax policy matters on a
continuous basis. Relationships are formed and these external af-
fairs personnel in?uence how tax policy is formed. At times, com-
panies pursue changes to tax legislation (or propose new
legislation) which suit them speci?cally e perhaps even them only.
TE 3 for example referred to a couple of occasions where his
company essentially ‘went it alone’ in crafting and proposing
legislation that would be bene?cial to it alone; TE 8 referred to
having had an input into the Homeland Investment Act
22
(part of
the American Jobs Creation Act 2004) while TE 10, referring to the
work of his external affairs tax staff member, said “he does an
enormous amount of State stuff. So California State, they come to
him to write laws”.
The exercise of power is an avenue of institutional reproduction.
Elites e who tend to be ‘knowledge experts’ and/or skillful nego-
tiators e “… may be both the architects and products of the rules
and expectations they have helped devise” (Powell, 1991, p.191).
Covaleski et al.’s (2005, p.135) study reinforced the notion that,
after negotiations, “the formthe resulting institution takes depends
on the relative power of the actors who support, oppose, or
otherwise strive to in?uence it” (see also Barley & Tolbert, 1997;
Covaleski & Dirsmith, 1988). Marcussen (2006), in a study of cen-
tral bankers, similarly found individuals to be important compo-
nents, with the core of the ?eld's transnational network being
small, coherent and highly interconnected, composed of a few key
individuals able to make an impact on national and international
monetary affairs.
Engaging in external affairs, incorporating direct lobbying of
legislators/Congress staff is an essential business activity for some
Silicon Valley companies. The larger companies invest a separate
and dedicated human resource to managing this activity, which
clearly indicates they derive important bene?ts fromit, presumably
increased economic capital. These companies clearly have and
utilize their social capital to demand and secure access to the right
people e once secured, the access makes the associated bene?ts
possible, which in turn makes the companies even more powerful.
The evidence strongly suggests some of the advantage these com-
panies achieve lies in having real input into shaping tax legislation
that will bene?t their own interests e but not necessarily those of
all companies, nor e perhaps even more importantly e of all tax-
payers or of wider society. These companies, through their elite tax
professionals are involved in proposing tax legislation, and reacting
to proposed tax legislation (Edelman et al., 1999) e as well as in
actively resisting certain tax laws proposed by the regulatory au-
thorities (McBarnet & Whelan, 1992) e clear evidence of endoge-
nisation of tax law making. Our informants used the language and
activities of endogeneity e “negotiation plan”, “game”, “play” e
which all the “players” involved considered “rational”, doxic,
practices.
4. Discussion
In-house tax professionals ostensibly work largely ‘in the
shadows’ within their own organizations, yet are able to signi?-
cantly in?uence and shape tax law and practices, both in their
organizational ?elds and in the wider economic and political en-
vironments. Drawing on their own accounts of how they operate,
we uncover this overlooked aspect of organizational life and
demonstrate the way in which relational power allows these pro-
fessionals to actively participate in the endogenisation of law.
While each of the in-house tax professionals have similar knowl-
edge bases and backgrounds, and mix in similar circles, they are not
equally powerful, which supports the view of power here as rela-
tional. The power to engage in institutional work can be understood
22
A detailed analysis of the evolution of this Act (similar to Bozanic et al.'s (2012)
work on a recent rule change, SEC's Rule 10b5-1, on insider trading) through the
theoretical lens utilised in this paper would further enhance our understanding of
the role of tax professionals and other players in the process. A number of studies of
the Act focus on measuring the ‘success’ of the Act and demonstrating that the main
bene?ciaries of the concession engaged in manipulation and even deception.
Alexander, Scholz, and Mazza (2009) ?nd that lobbying in relation to the Act has a
signi?cant effect on return on investment. Further analysis could include examining
the role and in?uence of lobbyists and an examination of data available via the
Center For Responsive Politics on lobbyist companies, campaign contributions etc.
Other relevant literature in the lobbying and political donations domains should
also be addressed in such work (e.g. Baumgartner & Leech, 2001; Brasher & Lowery,
2006).
E. Mulligan, L. Oats / Accounting, Organizations and Society xxx (2015) 1e14 11
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(2015),http://dx.doi.org/10.1016/j.aos.2015.09.005
as deriving from the relative power within the organization in
which the tax professional works.
At the micro level the role and power of the in-house pro-
fessionals is constrained by the organizational sub-?eld in which
they operate; some will have more freedom than others for crea-
tivity in terms of strategic action responses. There is variation in the
role, and more importantly the pro?le within the organization of
the in house tax professional, linked to the size and complexity of
the organization, which is invariably, re?ected in the complexity of
their tax arrangements. We ?nd in-house tax directors, for
example, performing valuable educational functions, promoting
the importance of tax to the organization and shaping and being
shaped by the organizational tax culture.
At the meso level, the extent to which the work of shaping the
regulatory environment to the ends of particular organisations is
undertaken will be in?uenced not only by the habitus of the
particular professionals involved, but also the attributes of the
organizational sub-?elds from which they come. This is where
mimetic pressures emerge, but the extent to which the in-house
professionals take these pressures back to their own organiza-
tions varies. In house tax directors interact with counterparts from
other organisations, both individually and through professional
network associations. The Silicon Valley professional tax associa-
tions, in particular the Silicon Valley Tax Directors Group, under-
take similar work to that observed by Suchman and Cahill (1996) in
their analysis of business lawyers servicing Silicon Valley organi-
zations: speci?cally, they engage in creating social structures that
help to reduce environmental turbulence by developing shared
understandings and diffusing legitimate practices, creating a
normative and cognitive order that allows in-house professionals
to make sense of regulatory requirements at the micro level, but at
the same time shaping that regulatory environment in the interests
of the ?eld. The spatial boundaries of ?elds are in constant ?ux, and
the tax ?eld is increasingly transnational, but at the same time
more exposed than many at national levels, with new rules and
regulations exposing practices to greater scrutiny, allowing chinks
of light to penetrate into the shadows where in-house tax pro-
fessionals operate.
23
At the macro level, both collectively and individually, but not as
a single uniform body, some in-house tax directors shape and in-
?uence the external environment through input to the legislative
process, as part of the game in which they are all engaged. At the
intraorganizational, micro, level of engagement, in house tax ex-
ecutives apply their professional knowledge base to local problems
with varying degrees of improvisation. They are able to in?uence
the tax culture within their own organisations for example by
inculcating new organizational actors. They engage in shaping the
framework of their professional work at the meso level, and also
participate in interorganizational events, discussions and networks.
It is at the meso and macro levels where their institutional work is
most visible and most in?uential, as they emerge fromthe shadows
of their respective organizations to participate in complex net-
works of interactions. It is at these levels also that the struggle for
in?uence, where the legal ?eld meets the regulatory, bureaucratic
and economic ?elds, and all of which spill across national borders,
is affected by, and affects, transnational governance developments.
We have demonstrated complex and dynamic interactions be-
tween key economic, political and organizational ?eld level actors,
mediated by the institutional work of in-house tax professionals.
Speci?cally, multinational companies have a signi?cant level of
in?uence over the design and implementation of the tax regula-
tions to which they themselves must ultimately adhere, without
much regard, if any, of wider societal consequences. Legislators
meet with and listen to the external affairs executives of such
companies and respond to their particular interests (Edelman &
Suchman, 1997). The question of who should be judge and jury
over the whole process is an interesting one, which requires further
research from other perspectives, including that of the legislators
(in this context including Congress staffers) e only then could one
get a sense of the extent to which a second order effect is at play
(where regulators anticipate regulatee responses) which arguably
brings some balance and pragmatism to the process. The ?nancial
crisis and subsequent responses by governments, NGOs and su-
pranational organisations provides scope for research into how the
dynamics we describe here play out differently at times of eco-
nomic and social stress.
The theoretical perspective adopted here, drawing on the
interplay between institutional work and the endogeneity of law,
has allowed us to examine the otherwise hidden exercise of power.
These elite professionals are engaging in subtle and diffuse activ-
ities that constitute exercises of power to varying degrees, within
their organizations, between organizations within the ?eld and in
shaping the wider environment. Some of this institutional work has
sinister overtones, for example in terms of manipulation tactics
designed to advantage particular organisations and reduce tax
contributions in ways not envisaged by legislators, with negative
consequences for wider society. But it is misleading to assume that
this is always the case; as professionals with a shared interest in
certainty and stability in the wider tax ?eld, maintaining the ?eld
doxa, the institutional work of in-house tax directors is also
directed towards working with the regulators and constraining the
excesses of fellow professionals.
Acknowledgements
We thank David Cooper (editor) and the two anonymous re-
viewers for their supportive and constructive comments. We also
thank the interviewees who participated in this study for their time
and insights and are grateful for the helpful comments received
from participants at the Critical Perspectives on Accounting con-
ference 2011 and the Irish Accounting and Finance Association
Conference 2012.
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