Dr. Devan Mescall (PhD), Professor of Accounting and Edwards Enhancement Chair in Business at the Edwards School of Business (Edwards), is an expert in taxation research. His primary research focuses on tax policy with a special focus on multinational taxation. His work examines the role of transfer pricing, tax shelters and corporate tax aggressiveness in capital markets. He was a recipient of the Social Sciences and Humanities Research Council of Canada (SSHRC) Insight grant for his project entitled: "The determinants and impacts of tax certainty in a global economy." His prolific taxation research has been published in top tier accounting journals including The Accounting Review, Canadian Tax Journal, Contemporary Accounting Research, and the Journal of Business Ethics. His research has both scholarly and practical policy impacts that are reaching local and international audiences.

Mescall shares his research insights on multinational taxation speaking to the important role taxes play in society, and on the behaviour of tax authorities with respect to tax aggressiveness and tax certainty. He also describes how accounting research can make an impact for Canadians, local communities, and Indigenous community development.

Multinational Taxation: From Tax Aggressiveness to Tax Certainty
A broad shift that has important implications for taxation has been the evolution and emergence of the global economy. According to Mescall, taxation has evolved as businesses and economies have moved from a domestic to global presence.

"Our tax systems originally were very much domestic tax systems designed to tax brick and mortar business within one jurisdiction and that's not how business is done today," said Mescall. "This has caused our tax authorities to evolve so that they have to work together, and this is something that never had to happen much before."

One of his recent studies, "How Does Transfer Pricing Risk Affect Premiums in Cross-Border Mergers and Acquisitions?", published in the Contemporary Accounting Research journal showed that if tax authorities are too aggressive, it will dissuade cross-border mergers and acquisitions and therefore foreign businesses will be less interested in setting up in that country.

"In our study, we looked at over sixty plus countries over a long time period and we had a unique measure of tax authority aggressiveness," he said. "We were able to show that tax aggressiveness was negatively related to premiums in cross-border mergers and acquisitions." As a result, Mescall was able to utilize this data to quantify the cost of tax authorities being too aggressive. His research uncovered that creating tax uncertainty has a negative cost effect and tax certainty could have a positive impact for business playing an important role in business planning and decision-making.

"As it became politically unpopular to raise tax rates, one of the ways that countries such as Canada were trying to protect their tax base was becoming extremely aggressive in their enforcement of the rules that they did have, and we show that creating uncertainty has a really negative cost," explained Mescall. This research on tax aggressiveness was highlighted in a 2018 OECD report that was directed to the central bank governors and finance ministers of the G20, and policymaking bodies for which this work will have real world impact on decision making.

He reported similar findings in another research project that captured survey responses from Chief Tax Officers for close to two-hundred corporations. Contrary to the belief that businesses are most interested in minimizing taxes, Mescall found that they are more interested in tax certainty.

"Businesses want to be able to plan and be more certain in what their costs are, and a lot of tax rules are very gray and uncertain," he said. "Our new project that received SSHRC funding looks at tax uncertainty and how to create tax certainty in different tax jurisdictions to give tax authorities the ability to provide businesses with rules where they know what to expect and can build a positive business environment."
This research can have a real influence because it shows how to create a strong business environment in Canada where the tax system is certain and fair such that it will benefit all citizens in Canada. Mescall has strong collaborations in this area of research with colleagues Pete Lisowsky at Boston College, Ken Klassen at the University of Waterloo, Jeff Pitman at Memorial University and Jeff Hoopes at the University of North Carolina.

Accounting Research as The Building Blocks for Important Outcomes that Matter for Canadians and Indigenous Community Development
Speaking to the importance of accounting and taxation research, Mescall points to the connection with policy and practical outcomes. "Business and accounting research provide really important building blocks that get us to these really big and important outcomes," he shared. "Tax research has always had a close relationship to policy and practical outcomes and that's one of the things that really drew me to it. We see that policymakers do pay attention to that."

Mescall’s research was also the first to document the impact of tax audit probabilities on the behaviour of multinationals which has been driven by the goal of building stronger business environments where everybody wins.

At the local level, Mescall is working with Mike Icton, CEO of the Muskeg Lake Cree Nation Investment Management Corporation, an urban reserve in Saskatoon. They recently co-authored an article, "Policy Forum: Establishing an Urban Reserve—Property Tax Challenges and Opportunities," in the Canadian Tax Journal, a top tier journal in the area, on how property tax impacted the creation of urban reserves. According to Mescall, the Muskeg Lake Cree Nation is the first major urban reserve in Canada that an urban reserve was within a city boundary. "Property tax issues played a really big role in both being a challenge and how they overcame it in their success story," Mescall explained. "We thought it was important to write about and bring to policymakers because there are things that can be done and to use this as an economic development tool for different reserves."

Urban reserves have a real positive impact for both the city and the First Nation, and the Muskeg Lake Cree Nation urban reserve was a great example that has been very successful. This was a unique collaboration and opportunity.

"What happens is that taxation, the right to tax that property, moves from the urban municipality to the First Nation and the transfer of the ability to tax an area is extremely unique that you don’t see very often," he shared.

The collaboration between Mescall and Icton created some new insights that not only built upon each other’s strengths but pushed the boundary of the accounting field but also fostered greater university-community partnerships.

Of particular importance for Mescall, was the potential outcome this work could have for local communities in the tax policy space. "Knowing that this journal is used by Canadian policy makers and that it could have an impact by potentially reducing the barriers and providing one more economic development tool for our First Nations in Saskatchewan, then that is exciting."

Lessons learned from this research grew into a whole section on taxation and Indigenous peoples that was also incorporated into his co-authored textbook, Introduction to Federal Taxation, developed with Nathalie Johnston at the University of Saskatchewan (Edwards) and Julie Robson at the University of Waterloo. This is one of the first textbooks that brought Indigenous taxation issues to light to addressing a host of misconceptions and is used at more Canadian universities than any other tax textbook in Canada.

Funding Acknowledgment: This research has been funded by the Social Sciences and Humanities Research Council and Edwards Enhancement Chair.

To learn more about Devan Mescall’s work, check out his profile page!

RECENT PUBLICATION HIGHLIGHTS
Icton, M., & Mescall, D. (2021). "Policy Forum: Establishing an Urban Reserve—Property Tax Challenges and Opportunities," Canadian Tax Journal, 69(3): 835-855.

Mescall, D. and P. Nielsen. 2021. "Corporate Income Shifting in an Era of Multilateralism: The Impact of Exchange of Information Agreements," Canadian Tax Journal, 69 (2):357-389

Johnstone, N., Mescall, D., and Robson, J. 2021-2022. "Introduction to Federal Taxation." 42nd Edition. Toronto, ON: Wolters Kluwers.

Mescall, D. and K. J. Klassen. 2018. "How Does Transfer Pricing Risk Affect Premiums in Cross-Border Mergers and Acquisitions," Contemporary Accounting Research, 35 (2):830-865.

Klassen, K. J., P. Lisowsky, and D. Mescall. 2017. "Transfer pricing: Strategies, practices, and tax minimization," Contemporary Accounting Research, 34(1): 455-493.

Mescall, D., F. Phillips, and R. N. Schmidt. 2017. "Does the Accounting Profession Discipline Its Members Differently After Public Scrutiny?" Journal of Business Ethics 142 (2): 285-309.

Klassen, K., P. Lisowsky, and D. Mescall. 2016. "The Role of Auditors, Non-Auditors, and Internal Tax Departments in Corporate Tax Aggressiveness." The Accounting Review 91 (1): 179 -205.

Hoopes, J., D. Mescall and J. Pittman. 2012. Do IRS audits deter corporate tax avoidance? The Accounting Review, 87 (5). 1603-1639

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