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1 – 10 of 165Thuy Tran and Trung K. Do
The purpose of this study is to examine the effect of terrorist attacks on tax avoidance. Further, the authors identify the possible channel leading to our main result and examine…
Abstract
Purpose
The purpose of this study is to examine the effect of terrorist attacks on tax avoidance. Further, the authors identify the possible channel leading to our main result and examine the role of social pressure.
Design/methodology/approach
Data pertaining to terrorist attacks within the USA are procured from the Global Terrorism Database. The final sample consists of 45,524 firm-year observations from 1993 to 2017. The methodology uses ordinary least squares regressions.
Findings
The authors find that firms located in close proximity to terrorist attacks (i.e. impact firms) significantly decrease their tax avoidance practices after the attacks. The authors further find that these impact firms are willing to pay more taxes post attack when their headquarters are located in higher social capital regions.
Originality/value
Studies have mainly focused on the macroeconomic effects of terrorism, and only recently have researchers shifted their focus to firm-level impacts. The authors provide strong evidence that extends the second line of the literature by exploring corporate tax activities attributed to terrorist events.
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Roger Graham, K.C. Lin and Jared Moore
This study examines whether US effective tax rates on foreign income of US multinationals (MNCs) vary according to the favorability of US macroeconomic conditions relative to…
Abstract
This study examines whether US effective tax rates on foreign income of US multinationals (MNCs) vary according to the favorability of US macroeconomic conditions relative to those of non-US countries. We use the pre-Tax Cuts and Jobs Act of 2017 regime as our setting and present evidence that US effective tax rates on foreign earnings are higher (lower) in periods when macroeconomic conditions in the US are favorable (unfavorable) relative to those elsewhere in the world. These results imply that firms seek to maximize after-tax returns when making asset allocation decisions, even when faced with US repatriation tax costs. We provide further evidence indicating that our primary results vary predictably according to certain firm characteristics, namely the ability to acquire funds for investment through less expensive means than repatriation of foreign profits, high intangible asset intensity, and tax aggressiveness. Finally, we show that economic uncertainty in the US counters the positive effects of favorable US macroeconomic conditions on US effective tax rates on foreign earnings. Our findings have implications for the policy debate around the US taxation of foreign earnings and provide a (partial) explanation for the observed lower-than-expected levels of repatriation activity following the implementation of the Tax Cuts and Jobs Act of 2017.
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Anshu Duhoon and Mohinder Singh
The increased interest among academicians to explore more about tax management behavior is evident in the literature on corporate tax avoidance. This paper aims to illustrate the…
Abstract
Purpose
The increased interest among academicians to explore more about tax management behavior is evident in the literature on corporate tax avoidance. This paper aims to illustrate the multiple aspects that influence the tax avoidance behavior of corporations and its impacts through the systematic review method.
Design/methodology/approach
This study used “Tax Avoidance” OR “Tax Aggressiveness” OR “Tax Planning” as search strings to extract the relevant literature from the Scopus database. This study is a comprehensive analysis of existing literature on corporate tax avoidance behavior. Further, the keyword network analysis has been used to find out the most explored and dry research areas related to corporate tax avoidance behavior using VOSviewer software.
Findings
The study finds that taxation decision is an important managerial decision. Managers adopt tax avoidance tactics to boost postax profits to meet the shareholders’ expectations, particularly of risk-averse shareholders, and sometimes for their benefit also. With this, this study also finds that firms’ characteristics, political connections and corporate social responsibility activities also impact taxation decisions. In addition, the study identifies that tax-avoiding behavior has a contradictory impact on firm value, market growth and corporate transparency disclosure decisions.
Research limitations/implications
The study assists the researchers by providing a brief overview of tax avoidance behavior, for corporates in understanding the implications of tax avoidance, and for policymakers to fix the taxation loopholes and bring necessary tax reforms.
Originality/value
This study adds to the existing literature by providing a thorough overview of theories, determinants and outcomes of corporate tax avoidance behavior.
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Shannon Jemiolo and Curtis Farnsel
This review analyzes the existing theoretical and empirical research on the relation between corporate taxation and corporate social responsibility (CSR). By synthesizing the…
Abstract
Purpose
This review analyzes the existing theoretical and empirical research on the relation between corporate taxation and corporate social responsibility (CSR). By synthesizing the current literature regarding the directional relation between tax avoidance and CSR, the authors are able to identify areas where further research on this relation should be targeted to maximize the public interest.
Design/methodology/approach
The authors conduct a literature review of articles published in leading journals in the fields of accounting, finance and management. Reputable working papers are included to support emerging trends in the research and suggest meaningful paths forward.
Findings
The literature reveals a complex relation between corporate tax avoidance and CSR. The published research offers theoretical and empirical support for both a substitutive and a complementary directional relation. An actionable takeaway from this review is that corporate taxation must be considered jointly with CSR when seeking to maximize the public interest.
Originality/value
The authors find a rapid influx of research over the past decade that explores the complex directional relation between corporate tax avoidance and CSR. This review will be useful to researchers that are interested in moving beyond a directional characterization of this relation. By synthesizing both established and emerging literature, the authors provide a foundation and direction for future research to examine issues that may directly inform tax or firm policies to increase overall stakeholder welfare.
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David Tree and Dilin Wang
This study explores the relationship between firm value and conforming tax avoidance (tax avoidance that does not create a book-tax difference). Tax avoidance provides firms with…
Abstract
This study explores the relationship between firm value and conforming tax avoidance (tax avoidance that does not create a book-tax difference). Tax avoidance provides firms with more cash and creates value. However, conforming tax avoidance has costs, such as lower book income, and these costs potentially lower firm value. As such, it is unclear whether conforming tax avoidance is positively or negatively correlated with firm value. We use a measure of conforming tax avoidance that was recently introduced in the literature, and bifurcate tax avoidance into conforming and nonconforming portions using a large sample. We present evidence that investors place a negative value on conforming tax avoidance for the average firm. We also examine the top quartile based on the measure of conforming tax avoidance and find a positive correlation between firm value and conforming tax avoidance for this subsample.
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Ling Tuo and Shipeng Han
This chapter proposes that tax education, proxied by Master of Science in Taxation (MST) degree, has substantial influence on chief financial officers’ (CFOs) knowledge, skill…
Abstract
This chapter proposes that tax education, proxied by Master of Science in Taxation (MST) degree, has substantial influence on chief financial officers’ (CFOs) knowledge, skill sets, values, and cognitive preferences and further influences their decisions in tax reporting. By empirically examining the relation between CFOs with MST degree and their companies' tax compliance based on US data between 2004 and 2016, we find that CFOs with MST degree are associated with improved tax compliance, suggesting that US MST education, beyond general accounting education, cultivates graduates with higher levels of professionalism and ethics in the field of taxation. Moreover, we find that CFOs' tenure, age, and compensation influence the relation between tax education and tax compliance, suggesting company's compensation and employee policies influence executives' tax decisions. Finally, we find that pressures from financial reporting and CEOs with accounting educational background could alleviate the role of CFOs with accounting educational background in tax reporting, while institutional owners could strengthen the role of CFOs. This chapter provides evidence regarding the social implication of MST program and has important managerial implication to tax compliance, executive recruitment, and corporate governance.
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Md Shamim Hossain, Md.Sobhan Ali, Md Zahidul Islam, Chui Ching Ling and Chorng Yuan Fung
This study examines the impact of profitability, firm size and leverage on corporate tax avoidance in Bangladesh, an emerging South Asian economy.
Abstract
Purpose
This study examines the impact of profitability, firm size and leverage on corporate tax avoidance in Bangladesh, an emerging South Asian economy.
Design/methodology/approach
A balanced panel data of 62 firms from Dhaka and Chittagong stock exchanges in Bangladesh from 2009 to 2020 were used to run the regression. This study employed the fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) to examine the hypotheses.
Findings
The findings show that large firms positively impact corporate tax avoidance. Similarly, profitability and leverage are positively associated with tax avoidance, and the results are significant. Furthermore, the study conducts robustness tests that confirm the findings.
Research limitations/implications
The use of cash effective tax rate (ETR) to investigate firms’ tax avoidance practices poses some limitations, and the results should be interpreted cautiously.
Practical implications
The current study may help policymakers better enhance tax collection from business firms. The findings could serve as a valuable input for effectively monitoring tax collection from large profit-earning firms.
Originality/value
To the authors' best knowledge, this is the first historical attempt in Bangladesh to use panel data to examine the relationship between the firm’s level characteristics and corporate tax avoidance. Panel data often provides greater flexibility with large data, simplifying calculation and statistical analysis.
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Kavita Pandey, Surendra S. Yadav and Seema Sharma
The purpose of this paper is to validate the theoretical finding that digital MNEs avoid physical presence norms of permanent establishment and royalty characterization rules for…
Abstract
Purpose
The purpose of this paper is to validate the theoretical finding that digital MNEs avoid physical presence norms of permanent establishment and royalty characterization rules for business and royalty taxation, respectively, to escape tax incidence in the market economy, using information, communication and technology features and transfer pricing (TP) manipulations.
Design/methodology/approach
Multiple case studies of MNEs from technology sector, based on judicial decisions in 141 cases, over taxability of profits earned from Indian economic activities. Additional in-depth case study of the Uber Group to study the tax avoidance structures under platform economy, by routing of Indian profits through The Netherlands, a tax haven.
Findings
The study finds a significant number of digital MNEs earning profits from India and avoiding tax by defying physical presence and royalty characterization. In majority of the cases, demand-side business activities are discharged through incorporating and remunerating affiliates at cost plus low markup, thus avoiding tax incidence, using TP manipulations under the arm’s length principle applied by governments for benchmarking the intragroup transactions of the MNEs.
Research limitations/implications
The research findings validate the view that digital features promote tax avoidance in the market economy.
Originality/value
The originality of the study lies in the validation of profit shifting through digital features from the developing market economy and portending that digital MNEs defy physical presence to avoid business taxation through TP manipulations.
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Md Shamim Hossain, Md Zahidul Islam, Md. Sobhan Ali, Md. Safiuddin, Chui Ching Ling and Chorng Yuan Fung
This study examines the moderating role of female directors on the relationship between the firms’ characteristics and tax avoidance in an emerging economy.
Abstract
Purpose
This study examines the moderating role of female directors on the relationship between the firms’ characteristics and tax avoidance in an emerging economy.
Design/methodology/approach
This study employs the second-generation unit root test and the generalised method of moments (GMM) techniques. The Kao residual cointegration test corroborates a long-run cointegration among variables.
Findings
Female directors demonstrate mixed and unusual findings. No significant impact of female directors on tax avoidance is found. In addition, the presence of female directors does not show any negative or significant moderating impacts on the relationship between leverage, firm age, board size and tax avoidance. However, having more female directors can negatively and significantly moderate the relationship between more profitable firms, larger firms and tax avoidance. These findings show that the board of directors could use the presence of female directors to maximise their opportunistic behaviour, such as to avoid tax.
Research limitations/implications
Research limitations – The study is limited by considering only 62 listed firms. The scope could be extended to include non-listed firms.
Practical implications
Research implications – There is increasing pressure for female directors on boards from diverse stakeholders, such as the European Commission, national governments, politicians, employer lobby groups, shareholders, and Fortune and Financial Times Stock Exchange (FTSE) rankings. This study provides input to decision-makers putting gender quota laws into practice. Our findings can help policy-makers adopt regulatory reforms to control tax avoidance practices and enhance organisational legitimacy. Policymakers can change their policy to include female directors up to the threshold suggested by the critical mass theory.
Originality/value
This is the first attempt in Bangladesh to explore the role of female directors in the relationship between the firms' characteristics and tax avoidance. The current study has significant ramifications for bringing gender diversity into practice as a component of good corporate governance.
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This paper aims to examine the impact of Zakat avoidance on firm value and investigates how board characteristics moderate this relationship within the context of Saudi Arabia, a…
Abstract
Purpose
This paper aims to examine the impact of Zakat avoidance on firm value and investigates how board characteristics moderate this relationship within the context of Saudi Arabia, a Muslim nation.
Design/methodology/approach
Using panel data from 2009 to 2020, encompassing 78 nonfinancial firms listed on the Saudi Stock Exchange, this study constructs an enhanced measure of Zakat avoidance that integrates insights from tax avoidance research, Shariah principles and the regulations of the Zakat, Tax and Customs Authority. This research uses empirical techniques, including panel data regressions and interaction analysis to investigate how board characteristics may influence this relationship.
Findings
Descriptive analysis reveals pervasive Zakat compliance, underscoring the effectiveness of Saudi Arabia’s robust Zakat system. Regression results indicate a positive association between Zakat payment and firm value. Remarkably, board characteristics exhibit no significant link to Zakat avoidance, emphasizing the potency of the Zakat system and religious adherence. However, the moderation analysis reveals that board independence and meeting frequency positively moderate the relationship between Zakat avoidance and firm value.
Practical implications
The study emphasizes the vital importance of upholding Zakat obligations to cultivate trust among stakeholders and amplify firm value. It advocates for governance frameworks that foster vigilant oversight and independence, ultimately enhancing a firm’s overall worth. Furthermore, the study’s findings provide valuable insights for corporate leaders, investors, policymakers and society as a whole, facilitating the promotion of ethical financial conduct and driving holistic economic development.
Originality/value
This research introduces novel insights by scrutinizing the intricate interplay of Zakat avoidance, board dynamics and firm value within the context of a culturally distinctive emerging economy. The development of a distinct Zakat avoidance metric, along with comprehensive empirical assessment, contributes to the originality of the study. Moreover, the investigation into the moderating influence of board characteristics adds value to the existing body of knowledge.
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