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Book part
Publication date: 15 November 2018

Zakir Akhand

This chapter investigates the effects of the corporate sector on the effectiveness of selected tax compliance instruments in the context of large corporate taxpayers…

Abstract

This chapter investigates the effects of the corporate sector on the effectiveness of selected tax compliance instruments in the context of large corporate taxpayers belonging to the finance, manufacturing, and service sectors. Applying multilevel logit models based on real tax office and survey data from Bangladesh, it is found that the filing compliance of large corporate taxpayers is influenced by penalty, tax audit, and taxpayer services, while reporting compliance is influenced by tax audit, criminal prosecution, and tax simplification. In the case of payment compliance, two coercive instruments – penalty and tax audit – have been found to be statistically significant. However, when sector characteristics are considered, the extent of the influence of these instruments, and, in some cases, their statistical significance changes. This suggests that the effectiveness of tax compliance instruments, among other things, largely depends on the sector affiliation of corporate taxpayers. Overall, this study establishes that corporate sector plays an important role in the effectiveness of tax compliance instruments, with the caveat that findings might be different if working definitions of the study variables were measured differently.

Book part
Publication date: 18 November 2014

Alexis Downs and Beth Stetson

This chapter applies an “integrative” model to examine the impact and interaction of economic and moral/social factors in the corporate tax compliance context. More…

Abstract

Purpose

This chapter applies an “integrative” model to examine the impact and interaction of economic and moral/social factors in the corporate tax compliance context. More specifically, it examines whether social norms moderate the effect of economic factors in this context.

Design/methodology

Fifty-five MBA students assumed corporate CFO roles and analyzed a proposed aggressive corporate tax shelter transaction (“tax shelter”). Participants indicated whether they would recommend the tax shelter and answered questions regarding the transaction and their corporate tax compliance views.

Findings

Hierarchical Regression results indicate that, in the corporate tax compliance context, decision makers’ norms (moral/social factors) moderate the effect of perceived expected value of aggressive tax transactions (economic factors). More specifically, results indicate that (1) perceived legality of aggressive corporate tax transactions significantly impacts willingness of corporate decision makers to recommend them, even when controlling for perceived economic effect of the transaction, and (2) due to moral/social factors, corporate decision makers often may not support aggressive tax treatments with material positive expected values.

Practical implications

Accordingly, (1) custom and social factors should be integrated into the corporate tax compliance decision-making framework, and (2) campaigns to strengthen corporate tax compliance should focus on the law’s text and intent as well as upon sanctions for noncompliance.

Details

Advances in Taxation
Type: Book
ISBN: 978-1-78441-120-6

Keywords

Article
Publication date: 2 September 2014

Nor Azrina Mohd Yusof, Lai Ming Ling and Yap Bee Wah

The pervasiveness of tax non-compliance remains a serious concern to most tax authorities around the world. The negative impact of tax non-compliance on the economy and…

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Abstract

Purpose

The pervasiveness of tax non-compliance remains a serious concern to most tax authorities around the world. The negative impact of tax non-compliance on the economy and the evolving nature of the Malaysian corporate tax system have motivated this study. The purpose of this paper is to examine the determinants of corporate tax non-compliance among small-and-medium-sized corporations (SMCs) in Malaysia.

Design/methodology/approach

This study used economic deterrence theory to analyze and test 375 tax-audited cases finalized by the Inland Revenue Board of Malaysia in 2011.

Findings

Multiple regression results revealed that marginal tax rate, company size and types of industry exerted significant effects on corporate tax non-compliance. The services and construction industries were noted to be the predominant industries engaged in tax non-compliance. The amount of concealed income unearthed during tax audit indicates clearly that there is widespread tax non-compliance in Malaysia and the quantum of tax lost through tax non-compliance is quite high.

Research limitations/implications

This study only sampled SMCs audited in 2011, hence, care has been exercised in generalizing the findings.

Practical implications

This study affirms that marginal tax rate, company size and types of industry are the main factors influencing compliance behavior of SMCs. The findings provide important insights not only to the Malaysian tax authority, but also to tax authorities and tax researchers in other parts of the world given that tax non-compliance of SMCs is a prevalent and universal problem. For example, with regard to the finding that marginal tax rate and company size are linked to non-compliance, it can be surmised that tax authorities ought to divert resources to firms with such characteristics when conducting audits.

Originality/value

Most tax research tax examining corporate tax non-compliance used financial data from annual reports to predict tax non-compliance, which are not very accurate. This study used actual tax audit cases obtained from the tax authority which are reflective of the actual situation. This study complements the scant existing literature by empirically evaluating the factors that influenced corporate tax non-compliance in a developing country like Malaysia.

Details

Journal of Applied Accounting Research, vol. 15 no. 2
Type: Research Article
ISSN: 0967-5426

Keywords

Book part
Publication date: 17 July 2014

Norasmila Awang and Azlan Amran

Tax compliance involves complying with the tax rules and regulation, which encompasses the filing, reporting and payment of tax. The two aspects of tax non-compliance are…

Abstract

Purpose

Tax compliance involves complying with the tax rules and regulation, which encompasses the filing, reporting and payment of tax. The two aspects of tax non-compliance are tax evasion and tax avoidance. While the ethicality of tax evasion as an illegal act of reducing tax is clear, the consensus regarding the morality of tax avoidance as a legal act of minimizing tax is mixed. This chapter will discuss the ethical perspective of tax (non)compliance.

Design/methodology/approach

We approach this topic by discussing the two important terms of tax non-compliance namely tax evasion and tax avoidance from the ethical point of view. The tax evasion and tax avoidance were critically evaluated to justify whether it is ethical or not. The tax non-compliance is also associated to the corporate governance which if do effectively help to protect the interest of larger stakeholder.

Findings

In a nutshell, tax non-compliance such as tax avoidance and tax evasion is unethical act and these acts of non-compliance go against the spirit of contemporary corporate governance which sought to protect the interest of the stakeholders.

Research limitations/implications

Tax non-compliance could enhance shareholders wealth (in terms of reduced tax); it affects the distribution of wealth (public benefits financed by tax revenues) among the society at large as another stakeholder affected by such act. Future research may be conduct to investigate this to the larger sample.

Social implications

Firms should avoid engaging in non-compliance activities such as engaging in tax evasion and aggressive tax avoidance as part of its social obligation to the society in line with the spirit espoused in the contemporary corporate governance.

Originality/value

This paper argues that tax non-compliance is unethical and highlights the importance of having efficient corporate governance for larger stakeholder’s interest.

Details

Ethics, Governance and Corporate Crime: Challenges and Consequences
Type: Book
ISBN: 978-1-78350-674-3

Keywords

Book part
Publication date: 18 September 2017

Ioannis Stamatopoulos, Stamatina Hadjidema and Konstantinos Eleftheriou

This paper examines the corporate income tax compliance costs and their determinants by analyzing survey and financial statements data from firms operating in Greece. We…

Abstract

This paper examines the corporate income tax compliance costs and their determinants by analyzing survey and financial statements data from firms operating in Greece. We find that corporate tax compliance costs are of considerable size and vary with several firm-specific characteristics, including the firm’s size, its age, the sector in which it operates, its location, and its legal form. The paper intends to raise awareness regarding the impact of tax compliance costs, especially for countries, such as Greece, that were significantly affected by the economic and financial crisis.

Details

Advances in Taxation
Type: Book
ISBN: 978-1-78714-524-5

Keywords

Article
Publication date: 4 February 2014

Khadijah Isa

– This paper aims to examine areas of tax difficulties encountered by corporate taxpayers in complying with tax obligations under the self-assessment system.

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Abstract

Purpose

This paper aims to examine areas of tax difficulties encountered by corporate taxpayers in complying with tax obligations under the self-assessment system.

Design/methodology/approach

A two-phase exploratory mixed methods approach was employed. The first phase involves eight focus group interviews with 60 tax auditors from the Inland Revenue Board of Malaysia (IRBM) and the second phase adopts a mixed-mode survey among selected Malaysian corporate taxpayers. Thematic analysis and descriptive and inferential analysis were used to examine the qualitative and quantitative data in achieving the objective.

Findings

Three dimensions of tax complexity encountered by corporate taxpayers were tax computations, record keeping and tax ambiguity. The first two complexity dimensions were faced largely by smaller companies. On the other hand, the least difficult tax-related areas were dealing with tax agents, submitting tax returns within the given time and dealing with the tax authority.

Practical implications

In a tax policy context, this study enables international tax authorities in general, and Malaysian tax authority in particular, to have greater confidence in developing and administering tax laws and policies to maintain and/or increase the overall level of corporate tax compliance.

Originality/value

Unlike prior studies that mainly used individual taxpayers or students as research participants, this study employed corporate tax auditors from the tax authority and corporate tax officers. Tax auditors and corporate taxpayers provide invaluable insights into the possible determinants of compliance variables. These insights are based on their practical experience in handling corporate tax audits and managing corporate tax matters, respectively.

Details

International Journal of Law and Management, vol. 56 no. 1
Type: Research Article
ISSN: 1754-243X

Keywords

Article
Publication date: 1 January 1997

A. Loh, M. Ariff, Z. Ismail, M. Shamsher and M. Ali

This is the first report on estimates of tax compliance costs of Malaysian companies. Compliance cost is an unavoidable cost of doing business and arises from activities…

Abstract

This is the first report on estimates of tax compliance costs of Malaysian companies. Compliance cost is an unavoidable cost of doing business and arises from activities associated with the reporting of income for tax purpose. The average compliance cost per company was estimated to be RM68,836, which is RM0.26 per RM 1,000 sales turnover. Sixty‐one percent of compliance cost was incurred in computation‐related activities and 39 percent in tax planning activities. Measured relative to revenue, the compliance cost is higher for smaller companies than for larger companies, which suggests that compliance cost is regressive, a finding similar to those reported in other countries.

Details

Pacific Accounting Review, vol. 9 no. 1
Type: Research Article
ISSN: 0114-0582

Article
Publication date: 21 August 2019

Theresia Woro Damayanti and Supramono Supramono

The study aims to empirically analyze the effects of the presence of female top managers and owners on corporate tax compliance.

Abstract

Purpose

The study aims to empirically analyze the effects of the presence of female top managers and owners on corporate tax compliance.

Design/methodology/approach

Data for analysis were sourced from the World Bank Enterprise Surveys that involved 23,178 private firms in 98 countries. The surveys used a stratified random sampling method by using three criteria, namely, firm size, business sector and geographic region, within each country. Further, data are analyzed using the ordinal logistic regression and supported by the marginal effect analysis.

Findings

The results show that the presence of female top managers and owners is a significant factor that underlies the firm-level tax compliance difference when firms exhibit relatively lower compliance.

Practical implications

Although this study shows that the determinants of corporate tax compliance are very complex, there are also crucial roles of top managers and owners' gender. This study advises firms to use the gender equality strategy to generate the best human capital, especially in their top management levels. Besides, this study can be helpful in designing policies that facilitate women to reach top managerial levels or to own businesses as an alternative method to enhance tax compliance for developing countries that fail to generate optimal corporate income tax revenues.

Originality/value

To the best of the authors’ knowledge, no previous studies examine the effects of the presence of female top managers and business owners on firms’ tax compliance policies. This study contributes to extend the understanding of the important role of women in corporate strategic decision-making, especially in taxation policies in various developing countries.

Details

Gender in Management: An International Journal , vol. 34 no. 6
Type: Research Article
ISSN: 1754-2413

Keywords

Article
Publication date: 16 December 2021

María Jesús Delgado-Rodríguez and Sonia De Lucas-Santos

This study aims to analyze whether tax compliance is the basis for the short-run dynamics of the development of welfare and happiness. The strengthening of tax compliance

Abstract

Purpose

This study aims to analyze whether tax compliance is the basis for the short-run dynamics of the development of welfare and happiness. The strengthening of tax compliance of corporates and citizens is not only important to achieve the goals assumed by fiscal policy but also is part of the values that can generate a higher level of welfare and happiness in Europe.

Design/methodology/approach

This study uses a dynamic factor model to offer new indexes that allow to monitor tax compliance, public spending and happiness trajectories and to evaluate their short-run relationships. Next, an analysis of the cyclical characteristics in terms of duration, amplitude and intensity is provided using the Harding and Pagan method (2002).

Findings

The empirical findings show that the European countries were able to reinforce tax compliance during the expansionary periods of the economy, and this has made it possible to increase public spending, and indirectly, happiness. Otherwise, this paper shows that the contractions of public resources during the global crisis, such as the case in the COVID-19, reduced the possibilities of well-being in Europe and made it more difficult to increase public spending and happiness.

Research limitations/implications

This study tries to analyze the transmission channels and relationships of three very complex variables: tax compliance, public spending and happiness. Incorporating these three variables into this research, with a short-run perspective, the authors have opened a new line of research that enriched the previous analysis. Therefore, the authors’ results should be considered the first step, that this study is going to continue to unravel the complexity of these relationships.

Practical implications

The design of policies aimed at improving individual, corporate and the well-being of nations needs them to incorporate elements of tax compliance as an objective that has economic and social implications. Individuals and corporates contribute to a fairer and more equitable society through compliance with tax obligations.

Originality/value

To the best of the authors’ knowledge, this is the first paper that offers evidence on the short-run dynamics of tax revenue, public spending and happiness for a better understanding of their relationships and behavior during the different periods of the economy.

Details

Corporate Governance: The International Journal of Business in Society, vol. 22 no. 3
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 6 September 2022

Vernesa Lavic

To answer the following research questions: (1) What is the tax burden, on average, as a percentage of the generated revenues of companies in BiH? (2) Are there…

Abstract

Purpose

To answer the following research questions: (1) What is the tax burden, on average, as a percentage of the generated revenues of companies in BiH? (2) Are there differences in the load level in relation to: (a) company size, (b) company location, (c) company age, (d) hiring of tax advisors and other external consultants on CIT issues and (e) company business activity.

Design/methodology/approach

In order to answer the research questions asked, quantitative analysis of primary data purposefully collected for this research will be used. The empirical part of the paper relies on the collection of primary data through survey using the method of stratified random sampling from the population of SMEs enterprises registered in BiH focusing only on FBIH and the RS. Regression analysis (OLS model) was used to estimate results.

Findings

Average share of tax compliance costs in SME revenues is 8.3%. Tax compliance costs are regressive, dependent on company age, location and business activity as well as on whether companies hire external consultants.

Research limitations/implications

The chosen research method is a telephone survey, with the aim of encouraging respondents to give answers to the questions asked, using experienced interviewers from the market research agency. However, the use of this method is not without limitations, and they refer to the time-limited duration of telephone interviews that require shorter questions, and pre-prepared answer options to make it easier for respondents to give answers. One of the challenges is the fact that most respondents do not want to talk to strangers over the phone and answer unknown numbers. This risk was especially pronounced because the topic of the research is related to CIT, so many respondents expressed doubts about the purpose of the question, refusing to provide accurate data. This risk was mitigated by asking questions to include certain scales in terms of income, number of employees and gross wages, to make respondents feel free to share this type of sensitive data with interviewers.

Practical implications

First, the analysis of this paper showed that specific, identified factors contribute to, or directly affect, the level of the tax compliance costs of corporate income tax in BiH. Second, there is currently no comprehensive analysis of the tax burden in BiH in the literature that would quantify the tax compliance costs, both at the BiH level and at the entity level. Based on the aforementioned, it is necessary to design a fiscal policy in such a way as to eliminate or, in cases where this is not possible, reduce the tax burden on the private sector in general. Based on the data collected in this research, fiscal policy should pay special attention to the tax treatment of start-ups, small and medium-sized enterprises and enterprises operating in services and other sectors by introducing tax incentives that will be of a general nature and that will be applicable to multiple activities and categories of enterprises, in order to eliminate the current negative effects of existing incentives aimed at predefined categories. Finally, it would be necessary to consider the possibility of closer and more extensive harmonization of entity tax laws, in accordance with international practices and accounting standards - in order to reduce the difference in burden primarily between entities, which would facilitate foreign investors and contribute to increased competitiveness in the domestic, regional and ultimately the global market. It would be desirable to use harmonization as a tool in support of promoting the competitiveness of the country in order to attract and maintain the level of foreign direct investment.

Originality/value

There is currently no comprehensive analysis of the tax burden in BiH in the literature that would quantify the tax compliance costs, both at the BiH level and at the entity level.

Details

Journal of Entrepreneurship and Public Policy, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2045-2101

Keywords

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