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1 – 10 of over 2000Oktavia Oktavia, Sylvia Veronica Siregar, Ratna Wardhani and Ning Rahayu
The purpose of this paper is to examine the effect of financial derivatives usage and country’s tax environment characteristics on the relationship between financial derivatives…
Abstract
Purpose
The purpose of this paper is to examine the effect of financial derivatives usage and country’s tax environment characteristics on the relationship between financial derivatives and tax avoidance.
Design/methodology/approach
This study uses a cross-country analysis with the scope of ASEAN (Association of Southeast Asian Nations) countries which consists of the Philippines, Indonesia, Malaysia, and Singapore.
Findings
The level of financial derivatives usage positively affects the level of tax avoidance. This finding indicates that financial derivatives can be used as tax avoidance tool. Furthermore, the positive effect of the level of financial derivatives usage on the level of tax avoidance is lower in countries with a competitive tax environment than in countries with an uncompetitive tax environment. This finding indicates that in country with a competitive tax environment, the use of financial derivatives as a tax avoidance tool can be replaced by the tax facilities provided by that country.
Research limitations/implications
This study uses four countries in the Association of Southeast Asian Nations region and does not test the sample based on the financial derivative types.
Practical implications
Tax authorities need to establish a clear tax regulation in regard to the tax treatment of financial derivatives transactions, e.g. define the definition of financial derivatives for hedging purposes and financial derivatives for speculative purposes; and define specific criteria to separate financial derivatives for hedging purposes from financial derivatives for speculative purposes. It is necessary to determine whether losses arising from derivative transactions are classified as deductible expenses or non-deductible expenses.
Originality/value
To the best of the authors’ knowledge, this study is also the first that provide empirical evidence that the relationship between financial derivatives and tax avoidance activities depends on a country’s tax environment.
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Youssef Alami, Issam El Idrissi, Ahmed Bousselhami, Radouane Raouf and Hassane Boujettou
The present paper aims to evaluate the structural impact of exogenously induced fiscal shocks on the Moroccan economy. This entails an analysis of the effect on the GDP of…
Abstract
Purpose
The present paper aims to evaluate the structural impact of exogenously induced fiscal shocks on the Moroccan economy. This entails an analysis of the effect on the GDP of COVID-19-induced fiscal shocks manifesting in terms of budgetary revenues and expenditures. A key aspect of this analysis addresses the size of the tax and fiscal multipliers.
Design/methodology/approach
The study examines the structural relationship between five variables during the period between Q1 2009 and Q2 2020 using an SVAR approach that allows for a dynamic interaction between ordinary expenditures and revenues on a quarterly basis.
Findings
Positive structural shocks on public spending are likely to negatively impact economic growth. Negative economic growth, in turn, will damage price levels and interest rates, mainly over the long term. However, public-revenue-multiplier-associated shocks exceed these price- and interest-rate multiplier-associated shocks. Indeed, a structural shock to ordinary revenues can have a positive but insignificant impact on the GDP stemming from the ensuing decrease in the government budget deficit that proceeds from the increase in government revenues.
Originality/value
This is one of the first studies in the Moroccan context to assess the impact of the current worldwide pandemic on public finances. In addition, this study highlights the importance of boosting economic recovery through public spending.
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Irenius Dwinanto Bimo, Christianus Yudi Prasetyo and Caecilia Atmini Susilandari
The purpose of this paper is to analyze the effect of internal control on tax avoidance analyzing internal (family ownership) and external (environmental uncertainty) factors on…
Abstract
Purpose
The purpose of this paper is to analyze the effect of internal control on tax avoidance analyzing internal (family ownership) and external (environmental uncertainty) factors on the effectiveness of internal control in preventing tax avoidance.
Design/methodology/approach
First, the authors examine the direct effect of the effectiveness of internal control on tax avoidance. Second, the authors examine the effect of moderation of family ownership and environmental uncertainty on the relationship of the effectiveness of internal control on tax avoidance. Third, the authors divide the full sample into two groups, high and less effectiveness of internal control to examine the direct effect of internal control effectiveness on tax avoidance and when considering moderating variables. Fourth, the authors use two different measures of the effectiveness of internal control.
Findings
This research found that effective internal control can reduce tax avoidance. Family ownership affects the relationship between internal control and tax avoidance, but environmental uncertainty does not influence the relationship between internal control and tax avoidance.
Practical implications
Internal control increases compliance with rules and policies, so companies must design and implement effective internal control to prevent tax avoidance activities in violation of tax regulations.
Originality/value
In contrast to previous studies, this study measures the effectiveness of internal control using the index of internal control practice disclosure and considers internal and external factors that can affect the effectiveness of internal control to prevent tax avoidance.
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This paper aims to examine how the volatility of foreign direct investment (FDI) inflows affects the volatility of corporate income tax revenue.
Abstract
Purpose
This paper aims to examine how the volatility of foreign direct investment (FDI) inflows affects the volatility of corporate income tax revenue.
Design/methodology/approach
The study has used an unbalanced panel data set of 129 countries over the period 1981–2016 and the two-step system generalized methods of moment approach to perform the empirical analysis.
Findings
The main findings are that FDI volatility enhances the volatility of corporate income tax revenue in less advanced economies, but reduces it in relatively advanced countries. The positive corporate income tax revenue volatility effect of FDI inflows is far higher in non-tax haven countries than in tax haven countries. Additionally, FDI volatility exerts a higher positive effect on corporate income tax revenue volatility as countries experience greater dependence on natural resources. Finally, the positive effect of FDI volatility on corporate income tax revenue volatility is further amplified by higher FDI volatility.
Research limitations/implications
One important limitation of the present analysis is the use of aggregate FDI inflows because of the lack of data over a long period on greenfield FDI inflows and cross-border mergers and acquisitions FDI inflows. Therefore, an avenue for future research could be to explore separately the effect of the volatility greenfield FDI inflows and the volatility of cross-border mergers and acquisitions FDI inflows on the volatility of corporate income tax revenue, when long-time series data (covering many countries) would be available.
Practical implications
These outcomes particularly shed light on the role of FDI volatility on the volatility of corporate income tax revenue, particularly in countries that are highly dependent on natural resources. Foreign capital flows, notably FDI flows, play an essential role for countries’ economic development through, inter alia, technology transfer, jobs creation and economic growth. Policymakers should aim to attract FDI, while also reducing their volatility, by designing and implementing policies and measures (such as those in favor of business environment improvement, property rights enforcement and political stability) that would assure foreign investors of the continuous high returns of their investments.
Originality/value
To the best of the author’s knowledge, this is the first time this topic is being addressed empirically in the literature.
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Anna Herculina Anculien Schoeman, Christopher C. Evans and Hanneke Du Preez
Correct registration for the value-added tax (VAT) is a key aspect of tax compliance; it is vital in ensuring adequate tax revenue collection in all countries but particularly in…
Abstract
Purpose
Correct registration for the value-added tax (VAT) is a key aspect of tax compliance; it is vital in ensuring adequate tax revenue collection in all countries but particularly in developing countries such as South Africa. Non-registration hinders sufficient tax revenue collection, stifles economic growth and causes unfair competition with formal businesses. The purpose of this study is to determine whether changes in the VAT rate affect the registration decisions of businesses, ultimately impacting upon tax compliance behaviour and tax revenue collection.
Design/methodology/approach
An online 2 × 2 between-subjects field experiment was conducted, as part of a broader study, to consider compliance with registration requirements by small business entities in South Africa, specifically when there are changes in the VAT rate.
Findings
Although the study establishes that changes in the VAT rate tend not to have a significant impact on the registration decisions of such taxpayers, it nonetheless indicates that the magnitude of the change in the VAT rate may be influential on registration decisions, whether relating to compulsory or voluntary registration. More particularly, the greater the magnitude of the VAT rate decrease (increase), the more likely it is that taxpayers will register (deregister) for VAT purposes, indicating that the magnitude of changes in the VAT rate do have an impact on VAT registration decisions and therefore on tax compliance more generally.
Research limitations/implications
Not only does the study add to the limited knowledge available on registration decisions of small businesses, but also gives valuable guidance to policymakers in terms of determining the VAT rate for the country.
Originality/value
Not only does the study add to the limited knowledge available on registration decisions of small businesses, but it also gives valuable guidance to policymakers in terms of determining the VAT rate for the country.
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Zaleha Othman, Mohd Fareez Fahmy Nordin and Muhammad Sadiq
This study provides in-depth explanation of Goods and Services Tax (GST) fraud prevention towards sustainability business.
Abstract
Purpose
This study provides in-depth explanation of Goods and Services Tax (GST) fraud prevention towards sustainability business.
Design/methodology/approach
This study applies a qualitative research method, i.e. case study, to address the specific research objective.
Findings
The finding revealed a GST prevention model towards sustainable business. The finding shows that it is pertinent for the government to set preventive strategies in order to retain sustainable income for the government. Two essential dimensions emerged in the findings to support preventive strategies, namely macro- and micro-level measures.
Practical implications
The findings of this study provide managers, investors and policymakers with evidence to what extent GST fraud could be minimize in order to safeguard government source of revenue and retain sustainable business in a country. As GST is an important source of revenue for the government, it is thus crucial to prevent fraud from occurring.
Originality/value
Past studies have primarily focused on GST implementation from the perspective of service tax effectiveness and efficiency. However, this study examined the impact of GST fraud to determine measures that could ensure service tax sustainability using preventive strategies, in turn, introducing to the existing literature on indirect tax.
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Fadoua Toumi, Mohamed Amine Bouraoui and Hichem Khlif
This paper aims to study the effect of Hofstede’s cultural dimensions (power distance, individualism, masculinity, uncertainty avoidance and long-term orientation) on corporate tax…
Abstract
Purpose
This paper aims to study the effect of Hofstede’s cultural dimensions (power distance, individualism, masculinity, uncertainty avoidance and long-term orientation) on corporate tax avoidance as proxied by the effective tax rate.
Design/methodology/approach
A sample of 944 observations during 2016 was analyzed at three different quantiles (Q 0.25, Q 0.50 and Q 0.75) based on a quantile regression approach.
Findings
Using Hofstede’s (2001) cultural dimensions (power distance, individualism, masculinity, uncertainty avoidance and long-term orientation), the authors find that individualism and masculinity are negatively associated with effective tax rates, and this negative relationship is more pronounced under low tax aggressiveness regime (third quantile). By contrast, long-term orientation is positively associated with the effective tax rate, and this relationship is more prevailing under aggressive tax regime (first quantile). These findings remain stable when using cash effective tax rate as an alternative measure for tax avoidance.
Originality/value
This study adds to the extant literature a further understanding of the impact of cultural dimensions on tax avoidance. The use of quantile regression approach shows how the effect of masculinity, individualism and long-term orientation on tax avoidance varies under different tax management regimes.
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Jennifer Anna Stark and Erich Kirchler
The purpose of this paper is to investigate the relationship of inheritance tax behavior with normative value principles and factors found relevant for income tax compliance…
Abstract
Purpose
The purpose of this paper is to investigate the relationship of inheritance tax behavior with normative value principles and factors found relevant for income tax compliance. Also, it examines the influence of affectedness and earmarking on inheritance tax compliance. Furthermore, it compares two countries similar in tax morale, tax culture as well as dominant normative value principles, Austria and Germany, of which one – Germany – levies inheritance taxes and the other – Austria – is debating its reintroduction.
Design/methodology/approach
A two (affected vs nonaffected) by two (Austria vs Germany) by two (inheritance tax vs stock profit tax) by three (no earmarking vs social justice earmarking vs equality of opportunity earmarking) experimental online questionnaire was conducted with 296 Austrians and 230 Germans.
Findings
Normative value principles and other socio-psychological variables play an important role concerning inheritance tax behavior. Affectedness does not influence inheritance tax compliance. Earmarking inheritance tax to projects corresponding to these value principles increases inheritance tax compliance in the Austrian sample and could represent a measure to increase inheritance tax compliance in countries implementing inheritance tax or increasing inheritance tax.
Originality/value
This study draws a comprehensive picture of the socio-psychological variables relevant to inheritance tax behavior and tests the effect of earmarking as a policy measure to increase inheritance tax compliance.
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Antonio Lopo Martinez, Hettore Sias Telles and Viviane Chiachio
The purpose of this paper is to investigate whether companies that donate to winning electoral campaigns are more aggressive in terms of tax planning than companies that do not…
Abstract
Purpose
The purpose of this paper is to investigate whether companies that donate to winning electoral campaigns are more aggressive in terms of tax planning than companies that do not make these contributions. The relationship between politicians and companies may be signaled by political connections in which companies try to get political benefits in exchange for providing politicians with campaign financing. The hypothesis is that a quid pro quo occurs in which these companies benefit from favorable tax treatment that reduces their relative tax burden.
Design/methodology/approach
The focus of this study is donations that were made in the presidential elections of 2010 and 2014. The sample covers the period between 2010 and 2016 for companies listed on the B3 Stock Exchange, using proxies for tax aggressiveness computed based on value-added reporting. Through linear regressions, the authors have tested whether the companies that made these campaign contributions tend to have a lower tax burden.
Findings
The proposed hypothesis was confirmed, revealing that a political connection between campaign donations reduces the tax burden for donating companies during the years following the election. These donations appear to depict an environment characterized by an exchange of favors in which the donating companies exhibit greater tax aggressiveness than non-donating companies.
Originality/value
The current study deals with a subject that has not yet been examined empirically in Brazil and reinforces the position adopted by the Supreme Court in prohibiting campaign donations to inhibit quid pro quo practices. The study offers additional arguments for the criminalization of the so-called “second set of books” used to record electoral campaign contributions.
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Sabina Kołodziej, Ewa Wanda Maruszewska and Małgorzata Niesiobędzka
This paper aims to present a study on the effect of income and expense shifting on the corporate income tax evasion – an example of intentional noncompliance practiced by tax…
Abstract
Purpose
This paper aims to present a study on the effect of income and expense shifting on the corporate income tax evasion – an example of intentional noncompliance practiced by tax agents. The authors expected that the tool used would differentiate the extent of understatement of tax liability.
Design/methodology/approach
Two experiments were conducted in which young (N = 62) and experienced (N = 68) tax agents read a scenario placing them in a position of an employee responsible for tax planning and calculations of tax liabilities. The respondents’ task was to decide about the extent of the tax liability understatement using income or expense shifting.
Findings
Research demonstrated significantly higher extent of corporate income tax understatement when using income shifting compared to expense shifting in case of experienced tax agents (Study 2) and on tendency level among young tax agents (Study 1).
Research limitations/implications
Results of the studies might be of interest to managers paying attention to tax procedures within the company, governmental agencies investigating corporate tax evasion, as well as educators responsible for tax agents’ initial training and lifelong learning.
Originality/value
This study concentrates on tax agents who are employed in companies and corporate income tax evasion, which has not been analyzed in the literature so far.
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