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Article
Publication date: 16 June 2022

Arfah Habib Saragih and Syaiful Ali

This study examines the moderating effect of XBRL mandatory adoption on the association between managerial ability and corporate tax outcomes.

Abstract

Purpose

This study examines the moderating effect of XBRL mandatory adoption on the association between managerial ability and corporate tax outcomes.

Design/methodology/approach

This study used a quantitative method with panel data regression models using a sample of listed firms on the Indonesia Stock Exchange from 2010 to 2019.

Findings

The regression results indicate that XBRL adoption moderates the relationship between managerial ability on tax avoidance and tax risk. Firms with higher managerial ability have relatively greater tax avoidance practices and lower tax risk following XBRL adoption. In this study, the authors document unfavorable and unexpected consequences of XBRL in an emerging country.

Research limitations/implications

Results are from a sample of firms from one emerging country.

Practical implications

It becomes important and necessary to develop more and better taxonomies with standardized extensions related to taxes information in the XBRL financial reporting to support the tax administrator’s performance in assessing firms’ tax avoidance and tax risk. The authors underscore the importance of improving taxes tags, including tags from financial statements and the disclosure section. This study may also inform policymakers in other countries that more adequate tax tags are needed to leverage benefit from XBRL adoption in monitoring and assessing corporate tax avoidance and tax risk.

Originality/value

This study is among the first to test an explanation for the moderating role of XBRL adoption on the association between managerial ability and corporate tax avoidance and tax risk.

Details

Journal of Applied Accounting Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0967-5426

Keywords

Article
Publication date: 21 April 2022

Imen Khelil and Hichem Khlif

This paper aims to review the empirical literature dealing with the association between family firms and tax avoidance.

Abstract

Purpose

This paper aims to review the empirical literature dealing with the association between family firms and tax avoidance.

Design/methodology/approach

Empirical papers are collected based on electronic searches in several editorial sources (e.g. Elsevier, Emerald, Meridian Allenpress, Springer, Sage, Taylor and Francis and Wiley-Blackwell) in family-related, accounting and finance journals. Key words used to identify relevant studies are “family firms” or “family ownership” combined with “tax avoidance”, “tax aggressiveness”, “tax evasion” and “tax heaven”. This search yields 21 published papers over the period of 2010–2022.

Findings

The summary of empirical studies examining the relationship between family firms and tax avoidance suggests that the majority of them have been conducted in Germany, USA and Taiwan and other European civil law countries. The association between family firms and tax avoidance is negative in USA, Finland and Belgium. By contrast, the relationship between family firms and tax avoidance is positive and significant in other developed (Germany and Italy) and developing economies (Brazil, India, Malaysia and Tunisia). In Taiwan, the impact of family firms on tax avoidance depends on corporate opacity that mitigates the negative impact of family firms on tax avoidance.

Practical implications

With respect to regulators, this review informs fiscal authorities that family firms are associated with high levels of tax aggressiveness in some settings (e.g. Brazil, Germany, Italy and Tunisia). Accordingly, they should be aware about this tax management behavior in family firms to avoid its adverse effect on tax revenues. With respect to auditors, this study alerts them about the necessity to consider fiscal audit risk linked to family firms when planning their audit missions especially in countries characterized by high level of corporate opacity.

Originality/value

This literature review represents a first historical record and an introduction for accounting scholars who aim to investigate the topics linked to tax aggressiveness in the family firms’ context. It also highlights some limits related to this stream of research and offers future research perspectives.

Details

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

Keywords

Article
Publication date: 25 April 2022

Muhammad Taufik

This study aims to shed light on Shari’ah supervisory boards (SSBs) and the possibilities of Islamic banks to reduce the tax avoidance. Performance and Shari’ah compliance…

Abstract

Purpose

This study aims to shed light on Shari’ah supervisory boards (SSBs) and the possibilities of Islamic banks to reduce the tax avoidance. Performance and Shari’ah compliance have been extensively studied; however, tax avoidance remains a challenge.

Design/methodology/approach

SSB characteristics, based on resource dependence theory, influence tax avoidance, including SSB size, educational level, expertise, reputation, remuneration and turnover. The samples were obtained from Islamic banks in Indonesia and Malaysia (2010–2020) using the data panel method.

Findings

Islamic banks avoid taxes through the effective tax rate and book tax difference. SSBs who have more expertise play a role in investigating the complexity of tax avoidance, and SSB reputation, who is a member of the Islamic bank regulator, understands immorality, resulting in reduced tax avoidance. Moreover, the recruitment system has been effective, as SSBs with more expertise have become more prevalent. Meanwhile, SSB from a Shari’ah background works only in regulated areas, simplifying Shari’ah compliance, in particular, attestation of financial reporting. A heavy workload is created by cross-membership, resulting in the neglect of the immoral value of tax avoidance. The calculation of tax avoidance also includes remuneration and bank assets.

Practical implications

Given the uniqueness of Islamic banks contributing to social welfare, tax regulators need to review the appropriateness of fees that can be treated as taxes. Tax regulators can join hands with Islamic bank regulators on this review.

Originality/value

To the best of the authors’ knowledge, this study is one of the first to examine the characteristics of SSBs and Islamic banks on tax avoidance. Separating Islamic banks by country enriches the analysis.

Details

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

Keywords

Book part
Publication date: 19 October 2020

Kirsten Cook, Tao Ma and Yijia (Eddie) Zhao

This study examines how creditor interventions after debt covenant violations affect corporate tax avoidance. Using a regression discontinuity design, we find that…

Abstract

This study examines how creditor interventions after debt covenant violations affect corporate tax avoidance. Using a regression discontinuity design, we find that creditor interventions increase borrowers' tax avoidance. This effect is concentrated among firms with weaker shareholder governance before creditor interventions and among those with less bargaining power during subsequent debt renegotiations. Our results indicate that creditors play an active role in shaping corporate tax policy outside of bankruptcy.

Article
Publication date: 8 March 2022

Lassaad Abdelmoula, Salim Chouaibi and Jamel Chouaibi

The purpose of this study is to examine the effect of business ethics and governance score on tax avoidance.

Abstract

Purpose

The purpose of this study is to examine the effect of business ethics and governance score on tax avoidance.

Design/methodology/approach

The sample used consists of 432 European companies belonging to the STOXX600 index during the period ranging from 2010 to 2019. The authors use the linear regression with a panel data.

Findings

The results show a negative and significant relationship between business ethics and tax avoidance. In addition, the governance is negatively and significantly correlated with tax avoidance. Similarly, this paper finds a negative and significant joint impact of business ethics and governance score on tax avoidance.

Practical implications

The findings of this paper could help firms consider their future growth opportunities in a context where the approach of business ethics occupies a central position in the business valuation.

Originality/value

This study is motivated by the low number of works in the context of the tax avoidance. It makes an important contribution to the academic literature through adding to the limited body of research on business ethics and governance score in a company setting. The firms strongly focusing on ethics and governance score are more likely to reduce their tax avoidance activities. Thus, these corporations aim to preserve their reputation and image. In this regard, it is worth saying that a positive reputation can increase the shareholder value. Accordingly, companies find a powerful strategy in their commitment and their ethical and responsible behavior, allowing them to maintain their good image and reputation.

Details

International Journal of Ethics and Systems, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2514-9369

Keywords

Book part
Publication date: 22 November 2017

Duane Windsor

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

Abstract

Purpose

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

Design/methodology/approach

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.

Findings

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.

Social implications

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.

Originality/value

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.

Article
Publication date: 3 February 2022

Dada Folorunso and Mark Eshwar Lokanan

The purpose of this paper is to review the quantum and magnitude of tax avoidance in Nigeria's top seven banks by using recognized tax avoidance proxies of the Generally…

Abstract

Purpose

The purpose of this paper is to review the quantum and magnitude of tax avoidance in Nigeria's top seven banks by using recognized tax avoidance proxies of the Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standard (IFRS) effective tax rate (ETR) and book-tax gap analysis for the appraisal.

Design/methodology/approach

Data for the paper came from the annual reports of the banks between 2011 and 2019. The individual bank’s tax data was analyzed for trends and then consolidated to establish the average percentages and the exact amount of the tax the banks evaded each year and cumulatively over the review period. The data were then matched with analytics of the drivers of tax avoidance in the reconciliation statement to highlight essential tax planning items and strategies being exploited by each bank in the pursuit of aggressive tax avoidance behavior.

Findings

F-test comparing the aggregate means (all banks) for tax evasion proxies of ETR and the book-tax gap was conducted at a 95% confidence interval. The results of this paper indicate no significant difference between the means obtained, thus affirming that the same pattern of tax evasion was consistent among the banks for the years reviewed.

Originality/value

The findings of this paper highlight the tax avoidance behavior of the referenced banks, identify weaknesses in the corporate tax planning policy pursued and serve to alert policymakers of the need to strengthen the laws and block loopholes that provide rooms for unrestrained tax avoidance behavior in the banking sector.

Details

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

Keywords

Book part
Publication date: 18 November 2014

James A. Chyz and Scott D. White

This paper takes a unique approach to provide additional insight into the agency view of tax avoidance. We directly investigate the association between the presence of…

Abstract

This paper takes a unique approach to provide additional insight into the agency view of tax avoidance. We directly investigate the association between the presence of agency conflicts and corporate tax avoidance. Using a measure of CEO centrality, developed by Bebchuk, Cremers, and Peyer (2011), we identify settings in which agency conflicts are likely to be high. In contrast to prior literature, our primary tests do not rely on the inferences of market participants regarding tax avoidance. We find that CEO centrality is positively and significantly associated with tax avoidance. Additionally, we analyze the mediating role of monitoring by institutional investors in our setting. We find that the relation between tax avoidance and the existence of agency conflicts is strongest for firms with low levels of CEO monitoring. We also add to prior literature by investigating the implications of our setting on future accounting performance and future firm value.

Details

Advances in Taxation
Type: Book
ISBN: 978-1-78441-120-6

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: 7 December 2021

Anissa Dakhli

The purpose of this paper is to investigate the direct and indirect relationship between board gender diversity and corporate tax avoidance using corporate social…

Abstract

Purpose

The purpose of this paper is to investigate the direct and indirect relationship between board gender diversity and corporate tax avoidance using corporate social responsibility (CSR) as a mediating variable.

Design/methodology/approach

This study uses a panel dataset of 200 French firms listed during 2007–2018 period. The direct and indirect effects between board gender diversity (BGD) and tax avoidance were tested by using structural equation model analysis.

Findings

The results indicate that the presence of women on corporate boardrooms negatively affects tax avoidance. The greater the proportion of women in boards, the lower the likelihood of tax avoidance practice. In the mediation test, CSR appears to partially mediate the link between women on boards and corporate tax avoidance. Additional analysis shows that the social dimension of CSR produces this mediating effect.

Practical implications

The results have practical implications for companies in regulating the composition of their boards. To benefit from diversity, firms have to increase women‘s percentage in their boards of directors. Also, investors are encouraged to pay attention to the percentage of female directors when investing and purchasing shares.

Social implications

This study proved empirically that the higher proportion of female directors significantly reduces the possibility of tax avoidance either directly or indirectly through enhancing CSR performance. The findings show that firms with gender diversified boards are more likely to get involved in CSR for hedging against the potential consequences of aggressive tax avoidance practices. In light of the above results, firms are well-advised to strongly apply the policy encouraging or mandating women as board members to take advantage of their expected benefits.

Originality/value

The originality of this paper consists in proposing the establishment of both direct and indirect relationships between BGD and corporate tax avoidance through CSR. Unlike prior studies that have been examining the direct relationship between corporate governance mechanisms and corporate tax avoidance, this study went further to investigate the indirect relationship between these two constructs. This study also differs from prior studies as it examines the effect of BGD on each of constituting pillars of CSR, namely, environmental, social and governance. To date, an extensive part of CSR research has used the combined score of CSR, but the effects on different CSR pillars remain little investigated.

Details

Corporate Governance: The International Journal of Business in Society, vol. 22 no. 4
Type: Research Article
ISSN: 1472-0701

Keywords

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