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The purpose of this paper is to examine whether the quality of management can mitigate the positive association between corporate tax avoidance and firm-specific stock price crash risk (SPCR).

The study is based on data from the Center for Research in Security Prices (CRSP), Compustat and ExecuComp and focuses on US-listed firms from 1980 to 2016. The authors employ ordinary least squares (OLS) regression as the baseline methodology and use five measures of tax avoidance and three measures of SPCR. Propensity score matching (PSM) and two-stage least squares methodologies are employed to address endogeneity concerns.

The authors find that more able managers weaken the positive relationship between tax avoidance and SPCR. The results suggest that the benefits of efficient tax management are more likely in firms with a more able management team as the likelihood of SPCR due to tax avoidance practices is reduced in such firms.

This study has important practical implications for investors who are concerned about firms that engage in tax planning activities that can reduce corporate taxes, but at the same time increase the SPCR. Considering the compelling arguments and the “dark” side of more able managers who may engage in opportunistic behaviour, the study provides useful evidence in support of more able managers.

This paper contributes to the SPCR literature by examining the effect of managerial ability on the likelihood of tax avoidance causing SPCR. Able managers are likely to lower the risk faced by investors and are less likely to extract rent and manipulate information. Therefore, the findings of this study have implications for investors by informing them of the negative value implications of tax avoidance and how they can be mitigated by hiring more able managers.

Offshore financial centres (OFCs) have again come under the spotlight. They have been accused of aiding terrorists by laundering their financial resources, allowing the funding of terrorism to go undetected. Their role as tax havens have also been highlighted in the collapse of Enron, a company that used OFCs to avoid paying millions of dollars in US tax. In response many OFCs have agreed to freeze terrorists’ assets, tighten money laundering legislation, provide a more open tax system and share information. There are, however, some OFCs that are resisting the mounting pressure to conform to international standards. These will become targets once more in June, 2002, when the Financial Action Task Force starts the process of identifying jurisdictions that ‘lack appropriate measures to combat terrorist financing’.

The purpose of this paper is the analysis of some important clauses inserted in the Portuguese corporate income tax (CIT) code and how they can be a source of divergence between reported earnings and taxable income. Additionally, the paper also discusses if these clauses are a source of management flexibility in reporting earnings, even if it means paying higher taxes.

The approach taken in this paper is based on a branch of legal research methodology. The paper uses applied legal research, exploring two avenues. One is based on the recognition that it is usually not possible to arrive at the correct interpretation of the law only by pure deductive reasoning, because hard cases' outcomes tend to form a body of jurisprudence that affects the application of legal rules. Verbal interpretation and manipulation of law usually give rise to contradictory outcomes from apparently identical situations. The approach is also based on macro tax data, in order to present some empirical evidence of hypothesized management behavior.

The paper finds that ambiguity in CIT laws induces a type of management behaviour characterised by minimizing tax liabilities estimates. Portuguese corporate tax returns show an improbable low level of adjustments related to clauses where flexibility in the timing of cost deduction is an option.

The paper adds to the body of literature that analyses the relation between the level of ambiguity and uncertainty in tax laws and its impact on managers' decisions, particularly about reported income, and presents some supportive evidence of the hypothesized behaviour. It is useful for managers, tax authorities and tax courts, by discussing the relation between the nature of tax clauses and management behaviour.

This chapter examines the ethics and business diplomacy of legal tax avoidance by multinational enterprises (MNEs).

The methodology assembles the relevant literature and examines alternative interpretations of corporate tax strategy. Key topics include business ethics and responsibility, business sustainability, economic patriotism and corporate inversions, tax havens, and possible solutions.

The debate concerns whether legal tax avoidance is unethical and/or poor business diplomacy. There are three possible strategies for MNEs. One strategy is intentional tax avoidance. Another strategy is business–government negotiation concerning tax liability. Another strategy is business diplomacy aimed at maximizing the social legitimacy of the firm across multiple national tax jurisdictions.

The chapter assesses four possible solutions for corporate tax avoidance. One solution is voluntary tax payments beyond legal obligations whether out of a sense of ethics or a strategy of business diplomacy. A second solution is international tax cooperation and tax harmonization in ways that minimize opportunities for tax avoidance. A third solution is increased stakeholder pressure emphasizing business diplomacy and tax cooperation and harmonization. The fourth solution is negotiated tax liabilities between each business and each jurisdiction.

The chapter provides an original systematic survey of the key aspects of corporate international tax avoidance in an approach in which business ethics and business diplomacy are better integrated. The value of the chapter is that it provides information and assembles relevant literature concerning corporate international tax avoidance, and addresses possible solutions for this problem.

Refers to the conclusion by the US Central Intelligence Agency (CIA) and State Department that low‐tax jurisdictions do not attract a disproportionate share of dirty money; the Financial Action Task Force agrees, even though it is part of the Organisation for Economic Cooperation and Development (OECD), notorious for its anti‐tax haven initiative. Points out that in fact so‐called tax havens are not money laundering centres, and that most money in tax havens is institutional investment; all rating systems of money laundering find that non‐tax havens outnumber tax havens. Argues that high‐tax nations’ laws against money laundering are not very successful, as the US Treasury estimates that 99.9% of the criminal money in the USA is laundered successfully; the laws tend to focus on process rather than results. Makes suggestions for improving international cooperation against money laundering.

While Mauritius is ranked as the fastest growing financial centre in Africa and the second-fastest-growing offshore financial centre (OFC) in the word by the New World Health in 2019, the country is facing severe allegations that it is progressing at the expense of other developing countries. In this respect, this paper aims to assess the contribution of the Mauritius OFC, the robustness of tax avoidance and evasion laws, the endeavours undertaken by the Mauritius Government to promote Mauritius OFC and the alleged classification of Mauritius as a tax haven.

To achieve the above research objectives, this paper will adopt the black letter approach. That is, the relevant legislation and case laws will be scrutinised. Also, books, journal articles, newspaper articles, reports from international bodies amongst others will be used. The research methodology also comprising a critical analysis which implies that existing studies conducted on the subject matter of this research will be assessed and the extent to which the researcher agrees with the existing work will be weighed.

Based on the critical analysis, this paper recommends that the Mauritius Income Tax Act be amended to provide for punitive and corrective actions for those engaged in impermissible tax avoidance. Additionally, for transparency and clarity, it is suggested that the Mauritius Revenue Authority (MRA) clarifies in a practice note the factors that it considers when determining the tax liability that should have been payable or when detecting tax avoidance cases. Similarly, to discourage tax evasion, the fines and penalties for tax-evading offences should be more strict and a regulatory framework for tax practitioners need to be set up.

To the author’s knowledge, this paper is amongst the first academic research that emphasises the position of Mauritius as an OFC and critically analysed the related laws relating to the financial world.

This paper aims to shed light on the potential implications for asset protection planning in multinational enterprises (MNEs) from the Organisation for Economic Co-Operation and Development (OECD)’s work on base erosion and profit shifting (BEPS) and the global push towards increased transparency and automatic information exchange.

An examination of the academic literature across a range of areas of the law relevant to MNEs and an analysis of the risks facing MNEs and the significance of asset protection in managing these risks. An examination of the OECD’s work on BEPS and automatic information exchange and implications for asset protection strategies utilised by MNEs with a particular focus on the critical issues of disclosure, ownership and control.

The full extent to which MNEs will be affected by the OECD’s work on BEPS remains unknown. Early signs indicate a significant shift in the focus of tax rules away from the pricing of specific transactions between related entities to the total global value chain of an MNE opening the door for more widespread adoption of enterprise liability and for states to obtain a complete view of MNE tax and asset protection planning, potentially including previously impenetrable trusts and limited liability companies.

This paper is one of the first to provide an analysis of the importance of asset protection to MNEs and the potential risks arising for asset protection planning in MNEs from the OECD’s work on BEPS and automatic information exchange.

The purpose of this paper is to investigate the determinants of tax-haven use of publicly listed Canadian firms.

Based on alternative measures of tax havens (TH) and referring to a sample of 235 Canadian firms over the period of 2014–2015, probit-regression analyses are used to examine the determinants of tax-haven use.

The authors provide evidence that multinationality, intangible assets, thin capitalization, withholding taxes, equity-based management remuneration and tax fees paid to auditing firms are positively associated with TH use. Furthermore, the authors show that the variable relating to R&D intensity is positively associated with TH use. The authors also document that strong corporate-governance structures are negatively associated with TH use.

This study is only limited to Canadian firms, so the results may not be generalizable to other countries.

The results may assist tax watchdogs in their efforts to understand the tax behavior held by Canadian firms. They may also be interesting for tax authorities in planning enforcement activities.

This study uses a sample from publicly listed financial and non-financial firms. It also uses various lists of TH published by various competent sources (IMF, 2000, 2007; TJN, 2005; OECD, 2012). The findings corroborate the recent media attention about the extensive use of TH by Canadian firms.

This study examines the importance of income income-shifting arrangements of US multinational corporations (MNCs) on future stock price crash risk.

This study employs a sample of 7,641 corporation-year observations over the 2005–2017 period and uses ordinary least squares regression analysis.

The authors find that the income-shifting arrangements of MNCs are positively and significantly associated with stock price crash risk after controlling for corporate tax avoidance and other known determinants of stock price crash risk in the regression model. This result is robust to alternative measures of stock price crash risk and income-shifting, and several endogeneity tests. The authors also observe that income-shifting arrangements increase stock price crash risk both directly and indirectly through the information opacity channel. Finally, in cross-sectional analyses, the authors find that the positive association between income-shifting and stock price crash risk is more pronounced for MNCs that use tax haven subsidiaries and have weak corporate governance mechanisms.

The authors provide new empirical evidence that MNCs will likely face significant capital market consequences regarding their income-shifting arrangements.

This study examines the impact of expanded geographical disclosures on nonprofessional investor judgments. Public country-by-country reporting (CBCR) is a way to increase corporate transparency, enhancing tax fairness and accountability (European Commission, 2016). Public disclosure would make large multinational companies share information about profits, taxes paid, and number of employees on a per-country basis. However, it is unclear whether nonprofessional investors would even use CBCR and how they would interpret the information. Adding to the policy debate on whether publicly available country-by-country information will be properly used, this study employs an experimental design to investigate the effect of disclosure availability and content on nonprofessional investor judgments. We find that participants receiving an expanded disclosure are able to more accurately assess the state of the social contract between the organization and society, imposing sanctions if necessary. Exploring CBCR provides timely evidence to regulators, standard setters, and tax fairness campaigners on the impact of expanded geographical disclosures as a means of increasing transparency and improving competitiveness.