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.

Long-Run Corporate Tax Avoidance

2008 ◽  
Vol 83 (1) ◽  
pp. 61-82 ◽  
Author(s):  
Scott D. Dyreng ◽  
Michelle Hanlon ◽  
Edward L. Maydew
Keyword(s):  
Tax Avoidance ◽  
Tax Rates ◽  
Corporate Tax ◽  
Effective Tax Rate ◽  
Initial Examination ◽  
Cross Sectional ◽  
Effective Tax Rates ◽  
Sample Mean ◽  
Tax Rate ◽  
Long Run

We develop and describe a new measure of long-run corporate tax avoidance that is based on the ability to pay a low amount of cash taxes per dollar of pre-tax earnings over long time periods. We label this measure the “long-run cash effective tax rate.” We use the long-run cash effective tax rate to examine (1) the extent to which some firms are able to avoid taxes over periods as long as ten years, and (2) how predictive one-year tax rates are for long-run tax avoidance. In our sample of 2,077 firms, we find there is considerable cross-sectional variation in tax avoidance. For example, approximately one-fourth of our sample firms are able to maintain long-run cash effective tax rates below 20 percent, compared to a sample mean tax rate of approximately 30 percent. We also find that annual cash effective tax rates are not very good predictors of long-run cash effective tax rates and, thus, are not accurate proxies for long-run tax avoidance. While there is some evidence of persistence in annual cash effective tax rates, the persistence is asymmetric. Low annual cash effective tax rates are more persistent than are high annual cash effective tax rates. An initial examination of characteristics of firms successful at keeping their cash effective tax rates low over long periods shows that they are well spread across industries but with some clustering.

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.

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.

Are financial derivatives tax havens? Evidence from China

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Wanyi Chen
Keyword(s):  
Stock Exchange ◽  
Tax Avoidance ◽  
Financial Derivatives ◽  
Relevant Research ◽  
Cross Sectional ◽  
Tax Havens ◽  
Content Type ◽  
Potential Risks ◽  
New Perspective ◽  
Sectional Analysis

PurposeThe purpose of this study was to examine whether the use of financial derivatives by business enterprises can avoid taxes and whether tax authorities can detect and effectively enforce measures regarding this emerging tax avoidance method.Design/methodology/approachUsing panel data from the Shanghai and Shenzhen Stock Exchange listed companies from 2008 to 2019, this study used the Heckman self-selection two-stage model and a cross-sectional analysis to test a total of 22,578 samples. Moreover, propensity score matching (PSM), instrumental variable and Heckman MLE methods were conducted in the robustness test.FindingsThe results showed that enterprises could use financial derivatives to avoid taxation. The greater the tax effort is, the more obvious the effect of the company's use of financial derivatives for tax avoidance, which proves challenging for tax authorities to identify and manage.Originality/valueThis study expands on research on corporate tax avoidance and provides a new perspective for the study of financial derivatives. Moreover, it improves relevant research in the field of tax regulation, offering practical guidance for tax authorities to govern the use of financial instruments to prevent potential risks effectively.

scholarly journals Will Problems Arise When Banks are Exempted from Thin Capitalization Regulation?

2018 ◽  
Vol 14 (3) ◽  
pp. 157-167
Author(s):  
Arfah Habib Saragih
Keyword(s):  
Fixed Effects ◽  
Quantitative Method ◽  
Tax Avoidance ◽  
Tax Rates ◽  
Effective Tax Rate ◽  
Effective Tax Rates ◽  
Tax Rate ◽  
Negative Effect ◽  
Thin Capitalization ◽  
Unbalanced Panel Data

This research was intended to provide empirical evidences that the exemption of banks from Minister of Finance Decree Number 169/PMK.010/2015 did not raise any significant problem on banks tax avoidance which was measured by effective tax rates. Quantitative method was used in this study by conducting regression-fixed effects method on unbalanced panel data. This study found that thin capitalization in banks did not impact effective tax rates significantly. Present research also found that the banks size and profitability were other determinants of the level of tax avoidance in the banks sample. Bank size and profitability had a significant and negative effect on effective tax rate.

No woman, no aggressive tax planning? A study on CEO gender and effective tax rates in the Lithuanian retail sector

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Aras Zirgulis ◽  
Maik Huettinger ◽  
Dalius Misiunas
Keyword(s):  
Retail Sector ◽  
Tax Rates ◽  
Effective Tax Rate ◽  
Effective Tax Rates ◽  
Content Type ◽  
Tax Rate ◽  
Tax Aggressiveness ◽  
Female Ceos ◽  
Opposite Sex ◽  
Ceo Gender

PurposeThe purpose of this paper is to investigate whether switching to a CEO of the opposite sex affects the tax aggressiveness of firms.Design/methodology/approachRegression analysis using a difference in difference approach and propensity score matching on a dataset of 8,798 firms from 2007 to 2017.FindingsThe authors find evidence that switching to a female CEO reduces the effective tax rate paid, implying a higher level of tax aggressiveness.Social implicationsThe findings contradict the narrative that female CEOs are less tax aggressive.Originality/valueThe authors are the first (to the best of the authors' knowledge) to specifically investigate if changing the CEO gender has an impact on the effective tax rate paid by the firm.

Auditor-provided tax services and long-term tax avoidance

2015 ◽  
Vol 14 (3) ◽  
pp. 285-305 ◽  
Author(s):  
Brian Hogan ◽  
Tracy Noga
Keyword(s):  
Negative Relationship ◽  
Tax Avoidance ◽  
Cost Benefit ◽  
Tax Rates ◽  
Negative Consequences ◽  
Effective Tax Rate ◽  
Accounting Firms ◽  
Content Type ◽  
Tax Rate

Purpose – The purpose of this paper is to determine the association between auditor-provided tax services (APTS) and long-term corporate tax rates. Design/methodology/approach – The paper uses empirical data and multivariate regression models to explore the relationship between a firm’s use of APTS and their long-term effective tax rate. Findings – An economically and statistically significant long-term negative relationship was found between firm levels of APTS and taxes paid. Further, a portion of this benefit is lost for some firms when returning to their auditor for tax services even after a short break. Originality/value – This paper contributes to the debate regarding the value of APTS by providing evidence of the apparent long-term negative consequences to firms who reduce their reliance on APTS, perhaps even through the engagement of separate accounting firms for their audit and tax functions, although these consequences may be mitigated upon return with a significant increase in APTS. However, this is the first study, to our knowledge, to explore, in a long-term setting, the consequences of a firm’s return to their auditors for a non-audit service previously reduced or terminated. Additionally, further incremental contributions are made to other studies that look at APTS and tax avoidance by studying the long-term relationship which allows firms to consider the cumulative cost/benefit relationship between independence and knowledge spillover.

Determinants of corporate R&D expenditures: the role of taxes

2020 ◽  
Vol 7 (54) ◽  
pp. 110-126
Author(s):  
Dorota Wasiluk ◽  
Anna Białek-Jaworska
Keyword(s):  
Tax Rates ◽  
Cross Sectional ◽  
Effective Tax Rates ◽  
Tax Rate ◽  
Long Run ◽  
Internal Funds ◽  
The Difference ◽  
The Relationship ◽  
D Investment

AbstractThe paper aims to find the relationship between corporate expenditures on R&D and tax burdens comparing German with French R&D incentives. We use the OLS method for the financial and patent cross-sectional data retrieved from the Amadeus database. The results confirm that firms with higher tax spread (the difference between the nominal and effective tax rates) spend less on R&D. These are in line with findings of a positive relationship between corporate R&D investment and tax burdens. Thus, firms that invest in R&D more pay higher taxes. However, they are less profitable as the return on R&D investment is visible only in the long run. German corporate expenditures on R&D are significantly sensitive to internal funds (proxied by cash flow) and depend on debt, contrary to French. The results indicate that the French firm's age (a phase of life cycle) has a significant impact on spending on R&D compared to German. Whereas in both countries, corporate expenditures on R&D are sensitive to the number of obtained patents. The capability of reducing the level of tax burdens below the nominal tax rate in the case of older German firms stimulates them to increase their R&D expenditures. However, German firms can decrease tax due to the use of R&D grants (revenues without taxation) in the absence of other tax incentives related to R&D.

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.

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