Asset ambiguity, reporting flexibility, and strategic declarations: Evidence from audit announcements and a dividend tax cut

This paper studies how ambiguity in asset classification and flexibility in tax reporting enable strategic tax declarations. Using administrative data from the Netherlands, we show that a 2005 audit announcement coincided with sharp increases in declared property-related assets, particularly among the wealthiest taxpayers, in sections not directly targeted by the announcement. The study also exploits a one-year dividend tax cut in 2007, which coincided with a second audit announcement, to further examine strategic spontaneous declarations and income shifting among shareholders, particularly those with substantial company holdings. The findings reveal how taxpayers exploit reporting flexibility to declare previously hidden and hard-to-trace wealth. The results underscore how classification ambiguity can be used to strategically reallocate wealth in response to tax policy changes.

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Publication Details

Journal
Journal of Economic Behavior & Organization
Published
2026-02-17
DOI
https://doi.org/10.1016/j.jebo.2026.107490
Primary Topic
Auditing, Earnings Management, Governance
Type
article
Field-Weighted Citation Impact
0.00
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article

Asset ambiguity, reporting flexibility, and strategic declarations: Evidence from audit announcements and a dividend tax cut

Stephen Kastoryano
Journal of Economic Behavior & Organization
Auditing, Earnings Management, Governance
article

Asset ambiguity, reporting flexibility, and strategic declarations: Evidence from audit announcements and a dividend tax cut

Stephen Kastoryano
article en

Abstract

This paper studies how ambiguity in asset classification and flexibility in tax reporting enable strategic tax declarations. Using administrative data from the Netherlands, we show that a 2005 audit announcement coincided with sharp increases in declared property-related assets, particularly among the wealthiest taxpayers, in sections not directly targeted by the announcement. The study also exploits a one-year dividend tax cut in 2007, which coincided with a second audit announcement, to further examine strategic spontaneous declarations and income shifting among shareholders, particularly those with substantial company holdings. The findings reveal how taxpayers exploit reporting flexibility to declare previously hidden and hard-to-trace wealth. The results underscore how classification ambiguity can be used to strategically reallocate wealth in response to tax policy changes.

Journal of Economic Behavior & OrganizationVol. 244
University of Reading (GB)
No poverty
Openalex Percentile: Top 53%
Auditing, Earnings Management, Governance
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Asset ambiguity, reporting flexibility, and strategic declarations: Evidence from audit announcements and a dividend tax cut — Stephen Kastoryano · Journal of Economic Behavior & Organization (2026) | TGRS Research Map | TGRS