Tax Risk or Tax Avoidance and its Relation to the Opacity of Financial Reporting

2019 ◽  
Vol 36 (3) ◽  
pp. 9-54
Author(s):  
Jong－Il Park ◽  
Su－In Kim
Keyword(s):  
Financial Reporting ◽  
Tax Avoidance

Pengaruh Konvergensi International Financial Reporting Standards (Ifrs) Terhadap Penghindaran Pajak(Tax Avoidance)

2018 ◽  
Vol 26 (2) ◽  
pp. 158-169
Author(s):  
Umi Wahidah ◽  
Sri Ayem
Keyword(s):  
Financial Reporting ◽  
Tax Evasion ◽  
Stock Exchange ◽  
Control Variable ◽  
Tax Avoidance ◽  
Sampling Technique ◽  
International Financial Reporting Standards ◽  
Reporting Standards ◽  
Control Variables ◽  
Financial Reporting Standards

This research aimed to examine the effect of the convergence of International Financial Reporting Standards (IFRS) on tax avoidance on companies listed in Indonesia Stock Exchange. Tax avoidance that used in this research was Cash Efective Tax Rate (CETR). This research is also use the control variable to get other different influence that different such as CSR, size, and earning management (EM. This research used populations sector of transport service companies that listed in Indonesia Stock Exchange. The data of this research taken from secondary data that was from the Indonesia Stock Exchange in the form of Indonesian Capital Market Directory (ICMD) and the annual report of the company 2011-2015. The method of collecting sample was purposive sampling technique, the population that to be sampling in this research was populations that has the criteria of a particular sample. Companies that has the criteria of the research sample as many as 78 companies. The method of analysis used in this research is multiple regression analysis. Based on regression testing shows that the convergence of International Financial Reporting Standards (IFRS) has a positiveand significant impact on tax evasion. This shows that IFRS convergence actually improves tax evasion practices. The control variables of firm size and earnings management also significantly influence the application of IFRS in improving tax avoidance practices, while CSR control variables have no role in convergence IFRS in improving tax evasion practice.

scholarly journals Management Of Accrual Components In Response To Corporate Income Tax Rate Changes: Evidence From Korea

2013 ◽  
Vol 29 (5) ◽  
pp. 1421 ◽  
Author(s):  
Won-Wook Choi ◽  
Hyun-Ah Lee
Keyword(s):  
Financial Reporting ◽  
Income Tax ◽  
Tax Avoidance ◽  
Corporate Income Tax ◽  
Tax Rate ◽  
Taxable Income ◽  
Accruals Management ◽  
Accrual Management ◽  
Aggressive Tax Avoidance ◽  
Statutory Tax Rate

Changes in the statutory corporate income tax rate provide firms with an opportunity to reduce their tax burden by shifting their taxable income from higher to lower tax rate years. One negative consequence of shifting taxable income across years is higher variation in book income for financial reporting purposes. Taxable income and book income are closely related in most countries, and, in general, reporting volatile book income across years is not a favorable signal to investors. This study investigates how firms shift taxable income and concurrently mitigate book income fluctuation by managing accrual components separately when the statutory income tax rate changes. Unlike prior studies, we decompose discretionary accruals into two components and examine distinctive patterns of accrual management in Korea, where book-tax conformity is high and aggressive tax avoidance is restricted. We find that firms manage book-tax accruals for taxable income shifting and manage book-only accruals to mitigate book income fluctuation. Furthermore, we find the extent of book-tax and book-only accruals management varies depending on the firms tax and financial reporting costs. The results of this study provide clear and compelling evidence of firms opportunistic accrual management behavior in response to statutory tax rate reduction.

scholarly journals Effects of IFRS adoption on tax avoidance

2017 ◽  
Vol 28 (75) ◽  
pp. 407-424 ◽  
Author(s):  
Renata Nogueira Braga
Keyword(s):  
Financial Reporting ◽  
Tax Avoidance ◽  
Publicly Traded ◽  
Corporate Tax ◽  
Firm Level ◽  
Tax Rate ◽  
Publicly Traded Companies ◽  
Accruals Management ◽  
Financial Reporting Standards ◽  
Ifrs Adoption

ABSTRACT This study investigates the association between mandatory International Financial Reporting Standards (IFRS) adoption and corporate tax avoidance. In this study, tax avoidance is defined as a reduction in the effective corporate income tax rate through tax planning activities, whether these are legal, questionable, or even illegal. Three measures of tax avoidance are used and factors at the country and firm level (that have already been associated with tax avoidance in prior research) are controlled. Using samples that range from 9,389 to 15,423 publicly-traded companies from 35 countries, covering 1999 to 2014, it is found that IFRS adoption is associated with higher levels of corporate tax avoidance, even when the level of book-tax conformity required in the countries and the volume of accruals are controlled, both of which are considered potential determinants of this relationship. Furthermore, the results suggest that after IFRS adoption, firms in higher book-tax conformity environments engage more in tax avoidance than firms in lower book-tax conformity environments. It is also identified that engagement in tax avoidance after IFRS adoption derives not only from accruals management, but also from practices that do not involve accruals. The main conclusion is that companies engage more in tax avoidance after mandatory IFRS adoption.

scholarly journals Use of Financial Ratios in selecting entities for Tax Audit purposes – empirical study in Albania

2021 ◽  
Vol 17 ◽  
pp. 297-313
Author(s):  
Rezarta Shkurti ◽  
Elena Myftaraj ◽  
Elsia Gjika
Keyword(s):  
Financial Reporting ◽  
Tax Evasion ◽  
Tax Avoidance ◽  
Binary Logistic Regression ◽  
Financial Statements ◽  
Financial Ratios ◽  
Risk Indicators ◽  
Economic Entity ◽  
Tax Audit ◽  
Tax Reporting

Information from financial statements and reported financial ratios have long been used to detect common phenomenon such as fraudulent financial statements, earnings management, and the relation between financial ratios and the level of tax risk of an entity. The focus of this study is to research the use of financial ratios that entities declare, in the detection of the magnitude of tax avoidance. In this paper we apply a binary logistic regression to detect which financial statement ratios differentiate between tax evading and non-tax evading entities. We analyse data from 183 tax audited Albanian entities for 2015 and 2016 accounting years and calculate several financial ratios to determine the level of tax risk based on the tax evasion magnitude found by the tax audit of these entities. We apply univariate and multivariate analysis and find several important ratios that can indicate quite accurately the high risk of tax audit of an economic entity. We suggest including these ratios as risk indicators or “red flags” in the selection procedures employed by the tax auditors. As tax reporting and financial reporting have similarities across countries of the region, our findings may be useful for other Southern Eastern European Countries as well.

scholarly journals Firms` Participation in Tax Amnesty Program Engaged in Financial Reporting Manipulation: An Empirical Evidence from Listed Companies in Indonesia

The Winners ◽  
2019 ◽  
Vol 20 (2) ◽  
pp. 85 ◽  
Author(s):  
Gatot Soepriyanto ◽  
Yanto Indra ◽  
Olivia The ◽  
Arfian Zudana
Keyword(s):  
Financial Reporting ◽  
Stock Exchange ◽  
Tax Avoidance ◽  
Financial Statements ◽  
Corporate Tax ◽  
Dummy Variable ◽  
Tax Amnesty ◽  
Avoidance Measures ◽  
Score Model ◽  
Amnesty Programs

The research investigated the relation between firms participated in tax amnesty programs and their tendency to manipulate financial statements. The research explored some unique research settings during Indonesia’s tax amnesty period in 2016-2017. To examine the association, the researchers employed Beneish’s M-Score model to categorize the firm’s tendency to manipulate its financial statements. As the test variable, it classified the firm’s participation in the tax amnesty program with a dummy variable, 1 if the firm participated, and 0 otherwise. To control the variations in financial statements manipulation, it also included firm size, leverage, and profitability in our empirical model. Based on the sample of 796 firm-year observations in the Indonesian Stock Exchange (IDX) from the 2012-2017 period, it is found some evidence that firms participate in tax amnesty programs do not engage in financial statements manipulation. Further analysis of the corporate tax avoidance measures shows that those firms do not engage in tax avoidance activities either. The results suggest that firms participate in the tax amnesty programs are not necessary ‘bad firms’, and they just participate as a ‘symbolic’ gesture to get some indirect benefits of the program.

scholarly journals The European Union as a Manager of Global 'Business and Human Rights' Regulation: Country-by-Country Reporting Rules

2019 ◽  
Author(s):  
Aleydis Nissen
Keyword(s):  
Human Rights ◽  
Financial Reporting ◽  
Raw Materials ◽  
Tax Avoidance ◽  
Legislative Process ◽  
European Economic Area ◽  
The European Union ◽  
Global Business ◽  
Business And Human Rights ◽  
The Eu

The European Union’s 2013 Country-by-Country Reporting (CBCR) rules bring within the public domain information on corporate payments made to governments all over the world for the purpose of exploiting natural resources in the oil, gas, mining and logging sectors. In so doing, the CBCR rules enhance transparency in these sectors and aim to reduce tax avoidance and corruption in resource-rich countries. Arguably, they also contribute to the European Commission’s long-term strategy to secure sustained access to raw materials in the European Economic Area. The CBCR rules represent one of the only three binding regulatory frameworks that have been adopted at the EU level to implement the 2011 UN Guiding Principles on Business and Human Rights. Just as with the two other initiatives that came into existence (the Non-Financial Reporting Directive and the Conflict Minerals Regulation), the immediate impact on the competitiveness of corporations based in the EU was a key concern during the legislative process. This article uncovers the two strategies that were employed to overcome such concern and give the CBCR rules a ‘global’ character.

scholarly journals Did the Adoption of IFRS Affect Corporate Tax Avoidance?

2019 ◽  
Vol 67 (4) ◽  
pp. 947-979
Author(s):  
Oliver Nnamdi Okafor ◽  
Akinloye Akindayomi ◽  
Hussein Warsame
Keyword(s):  
Financial Reporting ◽  
Control Sample ◽  
Tax Avoidance ◽  
Corporate Tax ◽  
Data Set ◽  
Generally Accepted Accounting Principles ◽  
Financial Reporting Standards ◽  
Ifrs Adoption ◽  
Short Run ◽  
Industry Membership

This article investigates whether the adoption of international financial reporting standards (IFRS) affected corporate tax avoidance in Canada. Based on a 3,200 firm-year data set of 400 publicly listed Canadian firms that adopted IFRS and 400 listed US firms, matched one-to-one using propensity score matching, the authors' regression results show that IFRS adoption was followed by a decrease in corporate tax avoidance in Canada, at least in the short run. The study finds a significant increase in cash tax paid in the post-adoption period by Canadian firms that adopted IFRS compared to US firms that used US generally accepted accounting principles. Additional regression results based on a small control sample of Canadian firms that did not adopt IFRS present collaborative evidence. The authors further test specific taxpayer attributes and accounting issues identified in Canada Revenue Agency internal memorandums—in particular, concerns that the adoption of IFRS may increase the risk of tax avoidance. While the authors find evidence that the IFRS firms that engaged in accrual management paid more taxes in the post-adoption period, their analysis provides no evidence of statistically significant relationships between IFRS adoption and tax avoidance associated with revenue management, ownership of foreign operations, industry membership, profitability, or impairment losses or writeoffs. Taken together, the authors' findings present preliminary but strong empirical evidence that IFRS adoption is associated with a decrease in corporate tax avoidance, at least in the short run.

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