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Article
Publication date: 12 September 2016

Abdul Haris Muhammadi, Zahir Ahmed and Ahsan Habib

The purpose of this paper is to examine the challenges faced by Indonesian tax auditors in auditing multinational transfer prices of intangible assets. This study then explores…

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Abstract

Purpose

The purpose of this paper is to examine the challenges faced by Indonesian tax auditors in auditing multinational transfer prices of intangible assets. This study then explores the suitability of mechanisms currently used by Indonesian tax auditors to ensure appropriate tax audit adjustments.

Design/methodology/approach

The authors use a qualitative research method involving semi-structured and open-ended interviews with the tax auditors in Indonesia. The authors also include some Indonesia court decisions pertinent to the research question above.

Findings

Findings indicate that Indonesian tax auditors face a number of difficulties during the audit of transfer pricing cases derived from intangible property, including a lack of transparency in taxpayers’ bookkeeping; limited taxpayer cooperation in providing data and documents; transfer pricing regulations; and problems related to organization and human resources. The study also finds that Indonesian tax auditors and tax officials handle transfer pricing cases by using a legal basis as reference and by performing a number of activities, including among others, comparable analysis.

Originality/value

The findings of this study should assist policy makers to improve the quality of transfer pricing audit. Also, tax auditors and account representatives who do not have enough experience in auditing transfer pricing cases derived from intangible property rights might use the outcomes of this study as a guide for dealing with those cases.

Details

Asian Review of Accounting, vol. 24 no. 3
Type: Research Article
ISSN: 1321-7348

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 the…

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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: 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 belonging to…

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.

Article
Publication date: 2 January 2018

Rasyidah Che Rosli, Lai Ming Ling and Roslani Embi

This paper aims to analyse the profiles of high net-worth individuals (HNWIs) who were caught for tax malfeasance during a tax audit and to examine factors that influence tax

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Abstract

Purpose

This paper aims to analyse the profiles of high net-worth individuals (HNWIs) who were caught for tax malfeasance during a tax audit and to examine factors that influence tax malfeasance among HNWIs in Malaysia.

Design/methodology/approach

This paper examined 235 HNWIs who were involved in tax malfeasance after audited by the Inland Revenue Board Malaysia from year 2009 to 2013. A research model was developed to examine the influence of four independent variables which are tax rate, level of income, source of income and taxation performed by tax professionals on tax malfeasance.

Findings

Multiple regression was used to test the proposed research model. The findings show that source of income and taxation performed by tax professionals influence tax malfeasance among HNWIs in Malaysia. This study also uncovers no significant relationship between tax rate and level of income with tax malfeasance of HNWIs.

Originality/value

This study could be the first in Malaysia that has used actual audited data in examining tax malfeasance among HNWIs. This study provides important insights not only to the Malaysian tax authorities but also to tax authorities and tax researchers in other parts of the world, given the fact that tax malfeasance of HNWIs is a prevalent and universal problem.

Details

Journal of Financial Crime, vol. 25 no. 1
Type: Research Article
ISSN: 1359-0790

Keywords

Article
Publication date: 12 December 2017

Henry Chalu and Hassan Mzee

This paper aims to explore factors influencing the effectiveness of tax audit in Tanzania. The study organized factors into four categories: organizational-related, tax

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Abstract

Purpose

This paper aims to explore factors influencing the effectiveness of tax audit in Tanzania. The study organized factors into four categories: organizational-related, tax auditors-related, taxpayers-related and regulatory-related factors.

Design/methodology/approach

The study used an explanatory approach, whereby data from 225 auditors in 23 tax regions in Tanzania were collected using a mailed questionnaire. The questionnaire had 25 statements representing factors and 5 statements representing the tax audit effectiveness. The collected data were analysed using both descriptive and inferential statistics. In the case of descriptive statistics, the study used frequency, percentage, mean and standard deviation. For the inferential statistics, the study used exploratory factor analysis (EFA) and multiple regression analysis.

Findings

The study findings showed that there were five main critical factors for tax audit effectiveness. The first factor, which is the implementation of tax auditors’ recommendations by management, was found under the organizational category. The second factor, which was adequacy of tax audit unit, was found under the tax auditors’ category, while the third factor was taxpayers’ attitude, found under the taxpayers’ category. The fourth and fifth factors, which were availability and application of regulations and standards for tax audit, and leadership and tax policies for tax audit, respectively, were found under the regulatory category.

Research limitations/implications

Despite the contributions of this study, there are some limitations which need to be acknowledged. First, data were collected from tax auditors only. Second, only 25 statements for factors were used. Third, the study has used only primary data. Last, the study has used perceptual measures of tax audit effectiveness. The authors consider that if other approaches were used, they could have reached different conclusions. Therefore, future studies could be conducted in the areas where limitations have been identified.

Practical implications

From a practical perspective, tax authorities may be relying heavily on tax auditors, as well as regulations and policies, for tax audit effectiveness. The study shows that taxpayers, management, as well as tax audit standards, are critical factors too. However, the study also has practical implications for governments, tax authorities, tax auditors as well taxpayers.

Originality/value

This paper extends prior research in the area of tax audit and is the first paper to use four categories of factors to analyse the influence of tax audit effectiveness, taking into consideration both tax authorities and taxpayers. It also used EFA, which helped to generate variables with multiple prior theories (i.e. theoretical triangulation). Hence, new theories were combined with old theories to produce findings which take into consideration the context of the country.

Details

Managerial Auditing Journal, vol. 33 no. 1
Type: Research Article
ISSN: 0268-6902

Keywords

Article
Publication date: 26 August 2014

Christian Plesner Rossing and Carsten Rohde

– The purpose of this paper is to critically review the empirical transfer pricing literature as a means of determining the agenda for future research.

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Abstract

Purpose

The purpose of this paper is to critically review the empirical transfer pricing literature as a means of determining the agenda for future research.

Design/methodology/approach

The review is carried out primarily by searching databases, academic journals and books. Second, professional surveys are reviewed to inform the development of research ideas.

Findings

The understanding and ability to explain international transfer pricing in practice remain limited despite a rapidly increasing tax regulatory pressure on multinational enterprises. One important explanatory factor is that accounting and tax research has not been integrated to a sufficient extent. As a consequence, rather isolated research streams and knowledge building have taken place, failing to leverage the synergies of a combined research approach.

Research limitations/implications

A stronger emphasis on the outcome of specific transfer pricing system designs would improve the literature’s current status in terms of whether the objectives aimed at by the system are actually achieved. A new framework and promising research questions are proposed to guide future work on this issue.

Practical implications

The proposed framework may serve as guidance for practitioners seeking to assess the performance of specific transfer pricing systems and potentially provide directions for refinement of current system designs when dysfunctional consequences are identified.

Originality/value

Previous transfer pricing research has taken a rather isolated approach. This paper is an attempt to guide future transfer pricing research towards an inter-disciplinary approach.

Article
Publication date: 12 September 2016

Tanya Y.H. Tang

The purpose of this paper is to investigate the effect of ownership structure arising from China’s unique privatization process on listed firms’ tunneling activities and their…

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Abstract

Purpose

The purpose of this paper is to investigate the effect of ownership structure arising from China’s unique privatization process on listed firms’ tunneling activities and their interaction with tax avoidance.

Design/methodology/approach

Using hand-collected data on the incompletely restructured state-owned listed firms and their applicable tax rate, this paper conducts a multivariate regression to test research questions. It also employs a triple differences method to examine whether the observed interaction between tax avoidance and tunneling is mitigated for well-governed firms.

Findings

It documents that controlling shareholders’ tunneling increases as the percentage of shares owned by state-owned enterprises (SOEs) increases. Evidence also shows that the magnitude of tunneling increases when SOEs controlled by the central government engage in more tax avoidance, suggesting that these firms use tax avoidance to facilitate wealth expropriation.

Social implications

These findings advance the understanding of the tunneling incentive behind the tax avoidance behavior for a subset of Chinese SOEs and have implications for emerging capital markets that are characterized by concentrated government ownership and weak corporate governance.

Originality/value

This paper is the first paper to investigate the effect of the incomplete privatization process on tunneling and the interaction between tunneling and tax avoidance activities. It extends prior studies by investigating the incentives behind SOEs’ tax avoidance from the perspective of an agency problem and documenting that good corporate governance plays an important role in deterring the diversionary tax avoidance.

Details

Asian Review of Accounting, vol. 24 no. 3
Type: Research Article
ISSN: 1321-7348

Keywords

Article
Publication date: 17 March 2022

Arfah Habib Saragih and Syaiful Ali

This paper aims to study the impact of the adoption of eXtensible Business Reporting Language (XBRL) on corporate tax avoidance.

Abstract

Purpose

This paper aims to study the impact of the adoption of eXtensible Business Reporting Language (XBRL) on corporate tax avoidance.

Design/methodology/approach

This paper used a quantitative method with panel data regression models using a sample of firms listed on the Indonesia Stock Exchange from 2011 to 2018.

Findings

The regression results demonstrate that XBRL implementation does not have any impact on corporate tax avoidance. The results indicate that tax avoidance is not reduced following XBRL adoption. This report shows unexpected and unfavourable outcomes of XBRL financial reporting in a developing country.

Research limitations/implications

This study employs a sample of firms from one emerging country only.

Practical implications

The study proposes several implications for using XBRL in tax reporting, which may help the tax authorities reduce tax avoidance. Regulators need to develop adequate taxonomies with standardized extensions related to tax information in the XBRL format. They include tax tags from financial statements and tax tags from the disclosure section, to gain more comprehensive corporate tax information.

Originality/value

This study proposes and tests an explanation for the effect of XBRL adoption on corporate tax avoidance in the context of a developing country.

Details

Journal of Financial Reporting and Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1985-2517

Keywords

Article
Publication date: 20 August 2018

Justin Chircop, Michele Fabrizi, Elisabetta Ipino and Antonio Parbonetti

This paper aims to investigate whether the level of social capital of the region in which a firm is headquartered affects its tax avoidance activities. Social capital can be…

Abstract

Purpose

This paper aims to investigate whether the level of social capital of the region in which a firm is headquartered affects its tax avoidance activities. Social capital can be defined as the mutual trust in society and literature shows that firms headquartered in high social capital regions exhibit higher level of corporate social responsibility. Recent research suggests that some stakeholders consider tax avoidance as a socially irresponsible and illegitimate activity, whereas others deem corporate tax payments as detrimental to social welfare because they hurt economic development. Building on this debate, the relationship between social capital and tax avoidance is empirically investigated.

Design/methodology/approach

A sample of 52,962 firm-year observations over the period 1990-2014 was used to empirically investigate the relationship between social capital and tax avoidance.

Findings

Consistent with the idea that managers consider corporate tax payments as a socially responsible action, evidence was found that firms headquartered in areas with high social capital engage significantly less in tax avoidance activities. It was also documented that the negative impact of social capital on tax avoidance is stronger in the presence of high religiosity, high corporate performance and lower sensitivity of CEO’s compensation to stock volatility.

Originality/value

This paper extends research on social capital and improves the understanding of the effect of the social environment on managerial decision. Importantly, by studying the relationship between social capital and tax avoidance, the authors add to the recent debate on companies’ perception of the desirability of tax avoidance activities from a social viewpoint.

Details

Social Responsibility Journal, vol. 14 no. 3
Type: Research Article
ISSN: 1747-1117

Keywords

Book part
Publication date: 10 August 2005

Robin R. Radtke

If individuals exhibit less ethical behavior in the workplace than in their personal decisions, this may constitute evidence of role morality behavior. Role morality can be…

Abstract

If individuals exhibit less ethical behavior in the workplace than in their personal decisions, this may constitute evidence of role morality behavior. Role morality can be defined as “claim(ing) a moral permission to harm others in ways that, if not for the role, would be wrong” (Applbaum, 1999. Ethics for adversaries: The morality of roles in public and professional life (p. 3). Princeton, NJ: Princeton University Press.) To investigate this issue, 55 practicing accountants completed and returned the experimental survey. Results show that in many situations, business decisions were less ethical than personal decisions, consistent with the theory of role morality. The implications and limitations of this study as they relate to practicing accountants are discussed.

Details

Advances in Accounting Behavioral Research
Type: Book
ISBN: 978-0-76231-218-4

1 – 10 of over 3000