Visualization of tax avoidance and tax rate convergence: Exploratory analysis of world-scale accounting data

Abstract

Purpose

This study aims to explore the evidence of the probability of firms’ tax avoidance and the downward convergence trend of national statutory tax rates and firms’ effective tax rates.

Design/methodology/approach

This research employs exploratory data analysis using interactive data manipulation and visualization tools, namely, R with SparkR, dplyr, ggplot2 and googleVis (GeoChart and Motion Chart) packages. This analysis is based on the world-scale accounting data of all listed firms from 148 countries spanning 30 years.

Findings

The results reveal the following: three types of evidences on probability of firms’ tax avoidance, showing a non-random distribution of firms’ effective tax rates and return on assets, cross-sectional variation of firms’ effective tax rates in each country, and the trend of difference between effective tax rates and statutory tax rates, and the downward convergence trend of statutory tax rates and firms’ effective tax rates.

Practical implications

The results highlight the prominent issues of world-scale tax avoidance and tax rate competition and facilitate a collaborative discussion between laymen and professionals using objective evidence.

Originality/value

A novel methodology is adopted through the visualization of world-scale accounting data, which can facilitate a new perspective, revealing unexpected patterns and trends in otherwise hidden information. This study also highlights the importance of global consideration of firms’ tax avoidance and tax rate competition, using objective evidence.

Citation

Saka, C., Oshika, T. and Jimichi, M. (2019), "Visualization of tax avoidance and tax rate convergence: Exploratory analysis of world-scale accounting data", Meditari Accountancy Research, Vol. 27 No. 5, pp. 695-724. https://doi.org/10.1108/MEDAR-02-2018-0298