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The study examines the impacts of debt financing on infrastructure development, investment, creation of new business entities, subsidies to private sector and GDP growth.
Abstract
Purpose
The study examines the impacts of debt financing on infrastructure development, investment, creation of new business entities, subsidies to private sector and GDP growth.
Design/methodology/approach
The methodology is based on five simultaneous equations which have been estimated through panel least square.
Findings
The most important conclusion of this study is the significant role of sovereign bonds in determination of subsidies to private sector. The role of domestic credit is important in South Asian context because of its significant role in creation of new businesses.
Research limitations/implications
This study supports the enhancement in credit financing to private sector for creation of new business activities in the economy.
Practical implications
The improvement in liquidity position by enhancing domestic credit facilities may ensure the sustainability and continuity of business activities. Such activities may improve GDP growth in future.
Social implications
The most important aspect of the study is to identify the role of debt financing in subsidies and creation of new businesses which are important elements of social economics.
Originality/value
Usually the impacts of sovereign bonds and external debts on infrastructure development and GDP growth are examined. But, to relate these debts to creation of business entities and subsidies is a new dimension.
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Keywords
Akmalia Ariff, Wan Adibah Wan Ismail, Khairul Anuar Kamarudin and Mohd Taufik Mohd Suffian
This paper examines whether financial distress is associated with tax avoidance and whether the COVID-19 pandemic moderates such association.
Abstract
Purpose
This paper examines whether financial distress is associated with tax avoidance and whether the COVID-19 pandemic moderates such association.
Design/methodology/approach
The sample covers 38,958 firm-year observations from 32 countries during the period 2015–2020. Financial distress is measured using the ZSCORE by Altman (1968), while tax avoidance is based on the book-tax difference.
Findings
Financially distressed firms exhibit low tax avoidance pre- and during the pandemic periods. The authors find higher tax avoidance during the pandemic compared to the pre-pandemic period, but the pandemic enhances the negative relationship between financial distress and tax avoidance.
Research limitations/implications
The study offers evidence on how financial distress drives firms to engage in more tax avoidance when firms globally encountered various levels of financial difficulty sparked by the economic challenges of the COVID-19 pandemic.
Practical implications
The findings provide insights to policymakers on the need to monitor and incentivise financially distressed firms, especially during economic challenges due to pandemic.
Originality/value
This study adds to the limited, albeit important, evidence on the joint effect of the COVID-19 pandemic and financial distress on tax avoidance.
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Mai-Huong Vo, Ngoc-Anh Nguyen, Estelle Dauchy and Nuong Nguyen
This study aims to estimate the pass-through rate of the increases in the excise tax and TCF tax on tobacco in Vietnam. This study seeks to shed light on how the tax burden is…
Abstract
Purpose
This study aims to estimate the pass-through rate of the increases in the excise tax and TCF tax on tobacco in Vietnam. This study seeks to shed light on how the tax burden is split between consumers and producers and inform policy discussions in the country. Using panel micro-level data collected from three waves of a nationwide retailer's survey, this study provides an evidence-based pass-through estimation for tobacco tax in Vietnam and contributes to the understanding of tax policy on smoking and smoking-related issues.
Design/methodology/approach
Following increases in the excise tax and TCF tax on tobacco in 2019, the differential effect of the tax hike on the “treatment group” (domestic cigarettes) versus the “control group” (illicit cigarettes) using a difference-in-difference (DID) analysis has been studied. The study utilized unique longitudinal retailers’ data on cigarettes prices in Vietnam from 2018 to 2019 to estimate the tax pass-through rate for some of the most popular factory-made cigarette brands.
Findings
This study found evidence of an over-shifting of cigarette taxes on smokers. Specifically, it discovered that the tax increase is absorbed more by low-priced brand smokers compared to premium brand users due to (1) the limited increase in prices under a pure ad valorem system and (2) the way the Vietnamese currency is denominated. Additionally, there is evidence of cushioning to mitigate price shock on consumers as the real prices increase gradually over the period of one year after the tax change.
Originality/value
To the best of the authors’ knowledge, this study is the first to collect and analyze a unique panel micro-level data from three waves of a nationwide retailers’ survey, which captures the changes in marketing and pricing strategies of the tobacco industry in Vietnam before and after an increase in excise tax in 2019. The results of this study could be used as a reference for future policymakers in considering increasing taxes on tobacco.
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