Search results

To complete this case, students will need to access financial statements from the Securities and Exchange Commission’s webpage. The links are provided. Students will also need to review the conceptual framework that is typically covered in Intermediate 1 to respond to question 5.

This case is based on the three financial statement restatements that Weatherford International Ltd. made over an approximately 18-month period. The restatements were due to a fraud committed by manipulating the income tax accrual in the financial statements. The manipulation used was to overstate the amount of income used to calculate the dividend exclusion and then use a relatively high tax rate to calculate the resulting tax benefit. The tax rate used for the fraud was substantially more than Weatherford’s effective tax rate (ETR), which was a prominent part of the company’s strategic growth plan. The tax senior with the external auditors who reviewed the entry made for the dividend exclusion captured the inconsistency with the comment that “This [the entry] deserves a huh?” The case is intended for students in Intermediate 2, where financial statement restatements and their effect on the company’s financial statements are typically covered. During the years covered in this case, Weatherford was also under investigation for violations of the Foreign Corrupt Practices Act (FCPA). Weatherford’s FCPA violations included multiple instances of bribery, the inappropriate use of volume discounts, improper payments and kickbacks in the United Nation’s Oil for Food program. Weatherford received the eighth-largest fine in the history of FCPA violations (at that time) of $152m. Weatherford’s FCPA investigation expanded, and the company paid another $100m in fines for violations of sanctions law and export control law. This case focuses only on the fraudulent manipulation of the financial statements through the tax accrual and does not delve into the other investigations. However, the linkage between those investigations and the fraud in this case is Weatherford’s nonexistent internal controls.

This case was designed to be used in Intermediate 2 financial accounting classes to highlight financial statement restatements and review the conceptual framework and materiality. The students who used the case did not have difficulty with the tax aspect of the case. However, most of the students had taken one tax class previously or concurrently. If students have not had any exposure to tax, the instructor might want to walk students through the tax aspects of the case.

This study aims to investigate the association between Corporate Social Responsibility (CSR) and tax avoidance, as well as the effect of earnings performance on this link. We suggest a negative association between CSR and tax avoidance based on the Stakeholder Theory. We also suggest that earnings performance moderates this relationship. Based on a sample of 25 Tunisian firms during the years 2012–2017, data were gathered via annual reports of the companies, and a survey-questionnaire was used to gather CSR information. The research design uses ordinary least squares (OLS) regression to investigate the association between CSR and tax. In addition, the analysis is performed using panel data to account for heterogeneity at the individual level and over time. Using this research design, the study provides a comprehensive examination of the effect of CSR on tax avoidance among Tunisian companies over a 6-year period. According to our findings, companies that participate in CSR initiatives show less tax avoidance than those that do not. Moreover, in line with the Slack Resource Theory, for businesses with higher earnings, the negative link between CSR and tax avoidance is stronger. Our research demonstrates that businesses may utilize CSR to improve their standing in the community and lower the likelihood of tax avoidance. These results suggest that profitable firms may have more funds available to spend on CSR initiatives and, as a result, are more motivated to maintain a positive reputation by refraining from tax avoidance strategies.

Introduction: When people need to take decisions, being economic decisions or otherwise, their decisions tend to rely on information the brain has already processed, and this includes the resources that the person has already invested. This is called sunk cost bias in the behavioural economics literature. On the other hand, mental practices could lead to the mental accounting bias, where people allocate a different value to a fixed amount of money, depending on circumstances.

Purpose: In this chapter, both biases mental accounting and sunk cost are investigated for the tourism industry in Turkey.

Methodology: The topic is researched through scenario-based questions and the Chi-square Automatic Interaction Detector (CHAID) method is applied.

Findings: As a result, it could be reported that people, regardless of gender, fall into sunk cost and mental accounting biases in decisions relating to their vacations. Mental accounting biases can be primarily explained using the scenario questions posed rather than gender, education, and income while sunk cost bias is explained by status, ‘being s university student’ and ‘income level’.

Practical implications: Rapid price changes in the tourism industry can disturb consumers who are mental accounting and sunk cost biased. So, they can change their holiday preferences or be dissatisfied with it and give negative feedback.

This study aims to examines both accrual and real-based earnings management (EM) behavior of listed corporations in tax-free countries during different economic situations. It also addresses the link between firm- and country-level determinants of accrual and real-based EM and explores economic conditions' influence on these determinants.

The study examines 1,608 firm-years, covers sixteen years (2004–2019), clustered into three periods according to the global financial crisis (GFC): four years prior (2004–2007), two years during (2008–2009), and ten years post the GFC (2010–2019). We employ the modified Jones model (performance-matched) developed by Kothari et al. (2005) to measure the accrual-based EM (positive and negative discretionary accrual EM) and the three levels model for Dechow et al. (1998) to measure the real-based EM (cash flow from operating, discretionary expenses and abnormal production cost).

The study finds a significant increase in EM practices in the listed corporations in tax-free countries during the economic downturn. These corporations are found to understate their earnings during the economic stress period. Simultaneously, the firm-level determinants of EM practices were at the same level of significance during different economic conditions in accrual-based EM. In contrast, the country-level EM determinants vary based on the economic conditions.

Financial reports' users gain a deep understanding of the quality of financial reports in the context of tax-free country. And, the study outcomes inspire policymakers to develop relevant legislation to mitigate financial reports' risk and adequately protect the financial reports' users.

This study aims to theoretically investigate the effect of activating corporate governance (CG) mechanisms on the association between adopting corporate social responsibility (CSR) and tax avoidance (TA). Based on the analyzing of the previous studies, the authors support the results of studies that found a positive effect for activating CG on the adoption of CSR. Also, they found that there is a negative impact of activating CG mechanisms on TA, as CG includes controls and procedures that contribute to limiting opportunistic behaviors of management and ensures making decisions that maximize value for shareholders. To the best of the authors' knowledge, it is the only chapter that examines the effect of activating CG mechanisms on the association between CSR and TA.

This study aims to investigate the role of negative media coverage of environmental, social and governance (ESG) issues in deterring tax avoidance. Inspired by media agenda-setting theory and legitimacy theory, this study hypothesises that an increase in ESG negative media coverage should cause a reputational drawback, leading companies to reduce tax avoidance to regain their legitimacy. Hence, this study examines a novel channel that links ESG and taxation.

This study uses panel regression analysis to examine the relationship between negative media coverage of ESG issues and tax avoidance among the largest European entities. This study considers different measures of tax avoidance and negative media coverage.

The results show that negative media coverage of ESG issues is negatively associated with tax avoidance, suggesting that media can act as an external monitor for corporate taxation.

The findings have implications for policymakers and regulators, which should consider tax transparency when dealing with ESG disclosure requirements. Tax disclosure should be integrated into ESG reporting.

The study has social implications related to the media, which act as watchdogs for firms’ irresponsible practices. According to this study’s findings, increased media pressure has the power to induce a better alignment between declared ESG policies and tax strategies.

This study contributes to the literature on the mechanisms that discourage tax avoidance and the literature on the relationship between ESG and taxation by shedding light on the role of media coverage.

The purpose of this paper is to investigate the relationship between tax avoidance and earnings persistence in the light of a developing economy, with the main focus on China.

In the analysis, the author conducts a survey on the tax avoidance situation of Chinese listed companies from 2012 to 2020. Then, a multivariate regression analysis is performed in order to analyse the relationship between corporate tax avoidance and earnings persistence.

The findings of the present study show that tax avoidance has a significant positive effect on earnings persistence. However, when the degree of tax avoidance is high, the “risk effect” of tax avoidance exceeds the “value effect”, and tax avoidance will reduce the persistence of earnings. This conclusion is even more prominent when the company is non-state-owned. Further research shows the increase of institutional investors’ shareholding ratio can improve “value effect” of tax avoidance, lessen “risk effect” of tax avoidance, and positively affect the relationship between tax avoidance and earnings persistence.

This study provides evidence for investors to understand the dual effect of tax avoidance on earnings persistence. The results may have implications for regulatory bodies. They can provide a better understanding of the corporate governance role of institutional investors in curbing opportunistic tax avoidance.

This study enriches the research on tax avoidance effects by analysing the impact of tax avoidance on earnings persistence. This study also compensates for the shortcomings of analysing earnings persistence mainly from the perspective of tax differences in the past, and promotes the study of the corporate governance effects of institutional investors under different levels of tax avoidance.

This paper examines the moderating effect of good corporate governance on the association between internal information quality and tax savings.

This study uses a quantitative approach. It employs an Australian sample of analysis composed of 1,295 firm-year observations from the period 2017 to 2021. Data relating to corporate governance are hand-collected from the annual reports.

Based on the result of the analysis, this study demonstrates that the interaction between corporate governance and quality of internal information is positively associated with tax savings. Superior corporate governance is critical in activating the effect of internal information quality on tax savings. This finding is robust to a battery of robustness checks and additional tests.

This examination utilizes only publicly traded companies from one developed country.

For the company management, an effective governance structure must be at the top because it will determine the development of all other areas. This study emphasizes the need to continuously improve the effectiveness of corporate governance practices. For long-term investors, an important indicator that can be considered in assessing the “safety” of a company’s tax strategy is its corporate governance aspects. For regulators, this study is expected to assist regulators in creating a more adequate corporate governance implementation and disclosure package to be implemented by corporations in the future.

This study provides new evidence on a crucial construct that can strengthen the relationship between internal information quality and tax savings.

From the perspective of local government tax administration, the impact of geographic dispersion on the corporate tax burden is investigated in this paper.

Using unbalanced panel data with a sample of listed companies from 2003 to 2020 in China, this paper focuses on the effect of geographic dispersion on corporate tax burden and the mechanisms.

It is found that corporate tax burden is positively related to geographic dispersion. It is also found that geographic dispersion affects the corporate tax burden by increasing the effort of local government tax administration. In addition, the relation between geographic dispersion and corporate tax burden is more pronounced for local SOEs prior to the implementation of Golden Tax Project III and in cases where local governments face stronger financial pressure to obtain revenue.

This study has important implications for the promotion of the coordinated development of the regional economy, as well as the legalization, modernization and informatization of tax administration.

It is important to consider economic and political factors when designing the tax mix and setting the level of corporate taxation. Increasing corporate taxation can be seen as an inefficient way to raise revenue for the state, as it can have a negative impact on investment and the competitiveness of firms. However, lowering corporate taxation can encourage investment and job creation, but it can also be perceived as supporting large corporations. The aim of this chapter is to evaluate corporate taxation, its position in the tax mix and its potential impact on economic growth. The revenues of corporate income tax (CIT) have an increasing tendency even though the tax rate was reduced from 41% to 19%. Revenues are influenced by both legislative changes and economic cycles. The level of taxation is also influenced by deductions, which include asset depreciations, research and development expenses, or loss deductions. The Pearson Correlation Coefficient was used to examine the correlation between the selected factors. A moderately strong positive correlation was found between GDP growth and CIT as a percentage of total taxes, as well as between GDP growth and CIT as a percentage of GDP.