Tax avoidance in management-owned firms: evidence from Brazil

2019 ◽  
Vol 15 (4) ◽  
pp. 580-592 ◽  
Author(s):  
Otávio Gomes Cabello ◽  
Luiz Eduardo Gaio ◽  
Christoph Watrin
Keyword(s):  
Tax Avoidance ◽  
Decision Makers ◽  
Risk Averse ◽  
Tax Rates ◽  
Effective Tax Rates ◽  
Content Type ◽  
Insider Ownership ◽  
Management Ownership ◽  
The Impact ◽  
Different Levels

PurposeThe purpose of this paper is to test if companies with a greater concentration of management ownership (and thus more risk-averse managers) avoid less tax.Design/methodology/approachThe authors use a regression analysis with panel data, using as a sample of Brazilian companies from 2001 to 2015. The authors investigate the impact of insider ownership on tax avoidance, testing how and how much different ownership levels of inside owner are associated with tax avoidance measured by effective tax rates and book-tax differences.FindingsThe results indicate that different levels of management ownership are associated with different levels of tax avoidance behavior.Originality/valueThis paper contributes to the literature showing that ownership and decision making are not always focused on only a few decision makers. The owners are likely to be more risk averse and therefore less willing to invest in risky projects such as tax avoidance.

Visualization of tax avoidance and tax rate convergence

2019 ◽  
Vol 27 (5) ◽  
pp. 695-724 ◽  
Author(s):  
Chika Saka ◽  
Tomoki Oshika ◽  
Masayuki Jimichi
Keyword(s):  
Tax Avoidance ◽  
Tax Rates ◽  
Cross Sectional ◽  
Effective Tax Rates ◽  
Accounting Data ◽  
Content Type ◽  
Tax Rate ◽  
Objective Evidence ◽  
New Perspective ◽  
Convergence Trend

Purpose This study aims to explore the evidence of the probability of firms’ tax avoidance and the downward convergence trend of national statutory tax rates and firms’ effective tax rates. Design/methodology/approach This research employs exploratory data analysis using interactive data manipulation and visualization tools, namely, R with SparkR, dplyr, ggplot2 and googleVis (GeoChart and Motion Chart) packages. This analysis is based on the world-scale accounting data of all listed firms from 148 countries spanning 30 years. Findings The results reveal the following: three types of evidences on probability of firms’ tax avoidance, showing a non-random distribution of firms’ effective tax rates and return on assets, cross-sectional variation of firms’ effective tax rates in each country, and the trend of difference between effective tax rates and statutory tax rates, and the downward convergence trend of statutory tax rates and firms’ effective tax rates. Practical implications The results highlight the prominent issues of world-scale tax avoidance and tax rate competition and facilitate a collaborative discussion between laymen and professionals using objective evidence. Originality/value A novel methodology is adopted through the visualization of world-scale accounting data, which can facilitate a new perspective, revealing unexpected patterns and trends in otherwise hidden information. This study also highlights the importance of global consideration of firms’ tax avoidance and tax rate competition, using objective evidence.

Determinants of corporate effective tax rates: evidence from the euro area

2020 ◽  
Vol 33 (3/4) ◽  
pp. 427-444
Author(s):  
Antonio Barbera ◽  
Paloma Merello ◽  
Rafael Molina
Keyword(s):  
Euro Area ◽  
Listed Companies ◽  
Tax Rates ◽  
Effective Tax Rates ◽  
Content Type ◽  
Individual Analysis ◽  
The Individual ◽  
The Impact ◽  
Generalized Moments ◽  
Positive Effect

PurposeThe purpose of this paper is to investigate the effect of the determinants of corporate effective tax rates (ETR) of listed companies in euro area.Design/methodology/approachWith a large and recent panel of 2,870 listed companies for the period 2005–2016, the authors use the generalized moments method (GMM) to estimate global models for three groups of countries and specific models for six selected countries: Germany, Spain, France, Italy, Belgium and Greece.FindingsThe results confirm that ETR have different determinants depending on the countries analyzed. There is a significantly positive relationship with leverage and negative with size and financial profitability. However, economic profitability shows a statistically positive effect in the new members, but negative effect on old ones. In the individual analysis, Germany and Spain maintain this negative association with return on assets (ROA), but Belgium and Greece show a positive effect. The effect of the economic cycle shows statistically relevant, negatively in Germany but positively in Belgium and Greece.Originality/valueThis paper makes a novel contribution to the current debate on the need for harmonization of corporate income tax in the European Union (EU). For the first time, the group of countries whose common currency is the euro is considered with a great level of detail. In addition, the impact derived from the enlargement of the euro area and the individual analysis of the main countries is included. The European authorities must take into account the specific differences found in the ETR determinants because it hinders to take measures that limit tax competition.

A Study of Perceived Ethicality of Low Corporate Effective Tax Rates

2017 ◽  
Vol 32 (1) ◽  
pp. 87-104 ◽  
Author(s):  
F. Todd DeZoort ◽  
Troy J. Pollard ◽  
Edward J. Schnee
Keyword(s):  
Mediation Analysis ◽  
General Public ◽  
Tax Avoidance ◽  
Tax Rates ◽  
Perceived Fairness ◽  
Effective Tax Rate ◽  
Effective Tax Rates ◽  
Tax Rate ◽  
Policy Practice ◽  
Participant Group

SYNOPSIS U.S. corporations have the ability to avoid paying domestic taxes to achieve an effective tax rate that is much lower than the statutory federal tax rate. This study evaluates the extent that individuals differ in their attitudes about the ethicality of corporations avoiding domestic taxes to achieve low effective tax rates. We also examine the extent to which the specific tax avoidance method used by corporations to access a low effective tax rate affects perceived ethicality. Eighty-two members of the general public and 112 accountants participated in an experiment with two participant groups and three tax avoidance methods manipulated randomly between subjects. The results indicate a significant interaction between participant group and tax avoidance method, with the general public considering shifting profits out of the country to achieve a low effective tax rate to be highly unethical, while the accountants find tax avoidance from carrying forward prior operating losses to be highly ethical. Further, mediation analysis indicates that perceived fairness and legality mediate the effects of participant type on perceived ethicality. Mediation analysis also reveals that sense of fairness and legality mediate the link between tax avoidance method and perceived ethicality. We conclude by considering the study's policy, practice, and research implications.

An Examination of Reputational Costs and Tax Avoidance: Evidence from Firms with Valuable Consumer Brands

2017 ◽  
Vol 39 (1) ◽  
pp. 67-93 ◽  
Author(s):  
Chelsea Rae Austin ◽  
Ryan J. Wilson
Keyword(s):  
Tax Avoidance ◽  
Tax Rates ◽  
Effective Tax Rates ◽  
Reputational Costs

ABSTRACT We expect firms with the greatest exposure to reputational damage among consumers will engage in lower levels of tax avoidance to minimize unwanted scrutiny that could impair the firms' reputation. We identify a set of firms with valuable consumer reputation using Harris Interactive's EquiTrend survey, which surveys consumers about their perceptions of valuable and prominent brands. We find evidence in support of our hypothesis that firms with valuable brands will engage in less tax avoidance. Specifically, we find a positive and significant association between our measure of reputation and both the GAAP and cash effective tax rates (measured over one and three years). We find mixed evidence on whether there is a negative and significant association between reputation and the probability the firm is engaging in tax sheltering.

Women on the board of directors and corporate tax aggressiveness in Australia

2016 ◽  
Vol 29 (3) ◽  
pp. 313-331 ◽  
Author(s):  
Grant Richardson ◽  
Grantley Taylor ◽  
Roman Lanis
Keyword(s):  
Board Of Directors ◽  
Selection Bias ◽  
Tax Avoidance ◽  
Multivariate Regression Analysis ◽  
Corporate Tax ◽  
Content Type ◽  
Tax Aggressiveness ◽  
Self Selection ◽  
The Board Of Directors ◽  
The Impact

Purpose This paper aims to investigate the impact of women on the board of directors on corporate tax avoidance in Australia. Design/methodology/approach The authors use multivariate regression analysis to test the association between the presence of female directors on the board and tax aggressiveness. They also test for self-selection bias in the regression model by using the two-stage Heckman procedure. Findings This paper finds that relative to there being one female board member, high (i.e. greater than one member) female presence on the board of directors reduces the likelihood of tax aggressiveness. The results are robust after controlling for self-selection bias and using several alternative measures of tax aggressiveness. Research limitations/implications This study extends the extant literature on corporate governance and tax aggressiveness. This study is subject to several caveats. First, the sample is restricted to publicly listed Australian firms. Second, this study only examines the issue of women on the board of directors and tax aggressiveness in the context of Australia. Practical implications This research is timely, as there has been increased pressure by government bodies in Australia and globally to develop policies to increase female representation on the board of directors. Originality/value This study is the first to provide empirical evidence concerning the association between the presence of women on the board of directors and tax aggressiveness.

Taxation in a mixed economy: the case of China

2017 ◽  
Vol 34 (1) ◽  
pp. 49-61 ◽  
Author(s):  
Davidson Sinclair ◽  
Larry Li
Keyword(s):  
Income Tax ◽  
Central Government ◽  
Corporate Income Tax ◽  
Tax Rates ◽  
Government Ownership ◽  
Effective Tax Rate ◽  
Effective Tax Rates ◽  
Content Type ◽  
Tax Rate ◽  
For Profit

Purpose The purpose of this paper is to investigate how Chinese firms’ ownership structure is related to their effective tax rate. The People’s Republic of China provides an interesting environment to examine the corporate income tax. Government has significant ownership stakes in the for-profit economy and state-owned enterprises (SOEs) are liable to the corporate income tax. This is very different to most other economies where SOE tends to dominate the not-for-profit economy and pays no corporate income tax. Government ownership also varies between the central government and local government in addition to state asset management bureaus. This provides a rich institutional background to examining the corporate income tax. Design/methodology/approach A panel data analysis approach is used to examine relationship between ownership structure and effective tax rates of all public firms in China from 1999 to 2009. Findings The authors report that effective tax rates do appear to vary across the ownership types, but that SOEs pay a statistically higher effective tax rate than to non-state-owned. In addition, local government owned SOE pay higher effective tax rates than central government and SAMB owned SOE. The authors also investigate Zimmerman’s (1983) political cost hypothesis. Unfortunately, these results are econometrically fragile with the statistical significance of those results varying by empirical technique. Originality/value This paper provides insight into government ownership and taxation in China.

Fuzzy multi-attribute group decision making to identify the order of establishing temporary logistics hubs during disaster response

2019 ◽  
Vol 9 (1) ◽  
pp. 2-21 ◽  
Author(s):  
Rajali Maharjan ◽  
Shinya Hanaoka
Keyword(s):  
Decision Making ◽  
Group Decision Making ◽  
Disaster Response ◽  
Group Decision ◽  
Decision Makers ◽  
Numerical Illustration ◽  
Content Type ◽  
Using Data ◽  
The Impact ◽  
Post Disaster

Purpose The purpose of this paper is to reveal the importance of the order of establishment of temporary logistics hubs (TLHs) when resources (mobile storage units used as TLHs) are limited and to present the development and implementation of a methodology that determines the order of establishment of TLHs to support post-disaster decision making. Design/methodology/approach It employed a decision support system that considers multiple decision makers and subjective attributes, while also addressing the impreciseness inherent in post-disaster decision making for ordering the establishment of TLHs. To do so, an optimization model was combined with a fuzzy multi-attribute group decision making approach. A numerical illustration was performed using data from the April 2015 Nepal Earthquake. Findings The results showed the location and order of establishment of TLHs, and demonstrated the impact of decision makers’ opinions on the overall ordering. Research limitations/implications The study does not discuss the uncertain nature of the location problem and the potential need for relocation of TLHs. Practical implications This methodology offers managerial insights for post-disaster decision making when resources are limited and their effective utilization is vital. The results highlight the importance of considering the opinions of multiple actors/decision makers to enable coordination and avoid complication between the growing numbers of humanitarian responders during disaster response. Originality/value This study introduces the concept of the order of establishment of TLHs and demonstrates its importance when resources are limited. It develops and implements a methodology determining the order of establishment of TLHs to support post-disaster decision making.

scholarly journals Are entrepreneurs becoming more risk averse?

2019 ◽  
Vol 35 (1) ◽  
pp. 1-2 ◽  
Author(s):  
John J. Oliver ◽  
Newton Velji
Keyword(s):  
Risk Averse ◽  
Corporate Acquisitions ◽  
Content Type ◽  
Industry Consolidation ◽  
Degree Of Consolidation ◽  
The Uk ◽  
The Impact ◽  
Startup Firms ◽  
Production Industry ◽  
Tv Production

Purpose This paper aims to discuss the emerging theme of risk aversion in entrepreneurs following high levels of industry consolidation. Design/methodology/approach This paper is a viewpoint on the authors’ opinion and interpretation of industry consolidation. Findings The UK Independent TV Production Industry has experienced a remarkable degree of consolidation with corporate acquisitions and mergers changing the size, shape and revenue distribution among firms in the industry. In addition, entrepreneurs appear to be more risk averse in terms of entering the industry. Practical implications If the trend in entrepreneurs in the UK TV Production Industry being more risk averse continues, then the number of new startup firms will fall and that could put the future of the industry at jeopardy. Originality/value This paper presents an interesting observation on the impact of consolidation of the UK Independent TV Production Industry, in so far as, entrepreneurs appear to be becoming more risk averse.

scholarly journals Assessing impact of base erosion and profit shifting on performance of subsidiaries of multinational corporations in Baltic countries

Equilibrium ◽  
2019 ◽  
Vol 14 (2) ◽  
pp. 277-293
Author(s):  
Egidijus Kundelis ◽  
Renata Legenzova
Keyword(s):  
Multinational Corporations ◽  
Empirical Research ◽  
Tax Avoidance ◽  
Empirical Literature ◽  
Company Performance ◽  
Tax Rates ◽  
Profit Shifting ◽  
Baltic Countries ◽  
The Baltic ◽  
The Impact

Research background: The problem of base erosion and profit shifting by multi-national corporations has been debated from different perspectives because of its multiple impact on the key actors in the economy. Studies refer to its positive impact on companies via corporate taxes saved, but its negative impact on governments via reduced tax collection. A number of empirical studies conducted in different countries support the substantial BEPS impact on company performance, but report differences in its magnitude. Other authors claim that, despite a wide range of tax avoidance opportunities available, tax avoidance is limited due to institutional measures imposed (tax audits, penalties for non-compliance) and high implementation costs. A majority of the previous empirical research covered large countries (USA, Germany) or regions (e.g. Europe), but there is a gap in the re-search assessing the BEPS impact on multinational corporations’ subsidiaries’ performance in countries with lower corporate income tax rates such as the Baltic countries. Purpose of the article: To assess the impact of base erosion and profit shifting on multinational corporations’ subsidiaries’ performance in the Baltic countries. Methods: Empirical research is conducted based on the framework employed by Hines and Rice (1994) to measure BEPS impact on company performance. Regression analysis with fixed effects was applied to a sample of 3,422 Latvian, Lithuanian and Estonian subsidiaries of multinational corporations, which are characterized by low corporate tax rates.  The data for the period of 2007–2015 was retrieved from the Amadeus database. Findings & Value added: The research revealed that Baltic countries’ tax differentials between multinational corporations’ parent and subsidiary countries might have a significant impact on the subsidiary’s financial performance. When the tax rate differences between Baltic and the foreign countries decrease by 1%, reported profits in Baltic countries increase by 2.3%, indicating profit-shifting behaviour. This is in line with the empirical literature and practices applied by multinational corporations. It is also in favour of anti-tax avoidance measures introduced by the EC to be adopted by Baltic and other EU countries.

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