Causal effects of corporate taxes on private firms' earnings management: a regression discontinuity analysis

PurposeThe authors emphasize the information role of earnings management and how it may be used to “mislead some stakeholders about the underlying economic performance of the company or to influence contractual outcomes that depend on reported accounting numbers.” Specifically, the authors examine the causal effect of tax incentives on private firms' earnings management based on a corporate tax reform in China.Design/methodology/approachIn December 2001, China implemented a tax collection reform which moved the collection of corporate income taxes from the local tax bureau to the state tax bureau. This reform results in exogenous variations in the effective tax rate among similar firms established before and after 2002. The authors apply a regression discontinuity design and use the generated variation in the effective tax rate to investigate the impact of taxes on firm earnings management.FindingsThe authors find that tax reduction substantially increases private firms' incentives to manage earnings information, and such effect is particularly pronounced when tax collection intensity and government interventions are low. Further evidence shows that lower tax rates stimulate firms' investment, inventory turnover and recruitment of skilled human capital. A plausible mechanism is that private firms signal a promising outlook by managing earnings to attain greater financing and improve investment/operation levels when financial constraints are removed.Originality/valueFirst, the authors present the causal effects of tax incentives on private firm's earnings management, which deepens the authors’ understanding on the determinants of firm's earnings information production. Second, this study also contributes to the literature on tax-induced earnings management. Third, the authors believe that this topic offers clear policy implications and would be of particular interest to regulators.

R&D tax incentives and innovation: unveiling the mechanisms behind innovation capacity

PurposeThere is a scarcity of empirical evidence in the literature on the chain of causality involving tax incentives for Research and Development (R&D) activities and their subsequent transformation into innovation. This study aims to assess the influence of R&D tax incentives on the organizational attributes of Portuguese firms to identify how they are converted into innovation.Design/methodology/approachA structural research model consisting of 339 companies that benefited from the Fiscal Incentive System supporting R&D in Enterprises, during the period from 2013 to 2016, was developed. This was done to assess the role of R&D tax incentives on the organizational attributes that form the innovation capacity. The model was validated using the multivariate statistical technique of structural equation modeling with partial least squares estimation (partial least squares structural equation modeling – PLS-SEM).FindingsThe results found suggest that although it is not possible to unequivocally identify the mechanisms used to convert tax incentives into innovation, it is possible to conclude that they play an important spillover effect for the construction and strengthening of organizational attributes. These form the basis of innovation capacity, to the extent that they positively influence the firms’ total assets, equity, liabilities, number of employees and sales. Hence, contributions are brought to both the literature on tax incentives and the general literature on innovation.Originality/valueFor policymakers, the evidence points to the fact that in addition to the incentives provided, novel mechanisms need to be established to help firms develop their absorptive capacity. The objective is to effectively convert the incentives received into innovation through the organizational attributes analyzed. From the firms’ point of view, the results found suggest that tax incentives act as a catalyst for making R&D investments. Additionally, there is an influence on employability, which effectively enhances the chances of innovation in the long run. Tax incentives received by Portuguese firms also have the effect of promoting economic dynamism – by enhancing the following: investments in infrastructure, the hiring of employees and the increasing of sales, generating positive externalities for both firms and society.

Pengembangan Metode Pemulihan Penerimaan Pajak Pasca Pandemi Covid-19

The case of the Covid-19 pandemic caused a slowdown in economic growth in Indonesia, which in turn resulted in a decrease in the amount of tax revenue, which eventually led the government to provide tax incentives to taxpayers. The COVID-19 pandemic has had a tremendous impact on all countries in the world, including Indonesia. The Central Statistics Agency (BPS) announced that the Indonesian economy experienced a slowdown in the first quarter of 2020, which was 2.97%. Compared to the fourth quarter of 2019, Indonesia's economic growth was recorded at minus 2.41%. This study aims to develop a method of tax revenue that has been adapted to the conditions of the Covid-19 pandemic. This study uses an exploratory method with a quantitative approach. The data used are the annual reports of companies listed on the Indonesia Stock Exchange (IDX) in 2018 and 2019. The sample selection method uses a purposive sampling method and obtained 233 samples for 2018 and 227 samples for 2019. With the results in the form of suggestions given in improving Post-covid-19 tax revenues, namely (1) Optimization of the withholding tax (WHT) mechanism, (2) Imposition of Final PPh for non-SME taxpayers, and (3) Efficiency of tax collection costs. This proposal requires in-depth study before implementation

Expanding the amount of preferential royalty facilities with hard-to-recover oil reserves

The article deals with the economic attractiveness of hard-to-recover oil reserves in the Ural-Volga region development. The fuel and energy complex is a budgetforming one for oil-producing regions and contributes to the development of all sectors of the economy, and is bound by social responsibility. The current situation and trends in the global economy demonstrate that oil production intensification is a paramount task to all related industries efficiency improving, taxes being the main share in the cost structure. Therefore, in order to stimulate the reserves from low-permeability reservoirs development, tax exemptions are provided in the form of a reduced tax on mineral extraction. The paper considers an example of development efficiency improving due to tax incentives. According to the assessment results, the option with tax incentives is more beneficial for both the state and the subsoil user. Keywords: oil fields development; hard-to-recover reserves; taxation; qualified for tax relief; production intensification.

Implementation of Tax Incentives to Avoid Unemployment Caused by the Economic Situation due to the COVID-19 Health Emergency in Mexico

Since the end of March 2020 millions, as the COVID-19 pandemic emerged as a health emergency, working people had to stay at home, telework or had to face consequences of the crisis such as low wages or layoffs.[i] In Mexico unemployment became a major problem for the economy. Although the country took measures to contain the imp act of the pandemic on the labor market, these have not been sufficient; the development and implementation of activities that create incentive or promotions are indispensable components of the recovery or sustainability of industries in times of crisis[ii]. According to Article 25 of the Political Constitution of Mexico[iii], the State is responsible for guiding national development and ensure that it is comprehensive and sustainable; the State shall, according to the Constitutional provision, ensure the stability of public finances and the financial system to help generate favorable conditions for economic growth and employment[iv]. I shall argue however that the fiscal policies implemented to contribute as determining factors in the sector of growing unemployment due to the COVID-19 pandemic have not been adequate even though the optimal measures were being taken under a more socialist system of governance in place during the two years.

ПОДАТКОВІ ІНСТРУМЕНТИ ФІНАНСОВОГО ПІДТРИМКИ МАЛОГО БІЗНЕСУ В РОСІЇ

This article is devoted to the study of the topic of tax levers for regulating the activities of small businesses in Russia. Tax aspects of business are included in the scope of financial support from the state for legal entities and individual entrepreneurs. The aim of the study is to analyze the tax instruments through which the state provides financial support to small businesses. The subject of the research is the measures of state financial support for small businesses in terms of taxation. In the course of the research, such methods were applied as: comparative, statistical, descriptive, analysis and synthesis. Research hypothesis. Identification of the optimal tax instruments for financial support of small business will allow the subjects of this sphere of the economy to function effectively without causing a conflict of interest between entrepreneurship and the state in paying taxes to the budget. Presentation of the main material. Small business entities in the Russian Federation have the right to state support in the form of financial, property, information, and consulting assistance. Financial assistance, as the most significant, consists in the provision of government subsidies, preferential types of loans, tax holidays, special tax regimes, simplified accounting procedures, etc. Tax instruments of financial support are of key importance for business entities, as they allow regulating the tax burden depending on the types of activities, the scale of the organization, the amount of income and many other factors. For Russian business entities, there are 5 taxation regimes, of which one is general and four special (preferential), tax holidays for small businesses and tax incentives for types of taxes. Originality and practical significance of the research. A comparative analysis of special tax regimes showed that the profitability of a particular tax regime is determined by the goals of the business, the scale and scope of activity. Conclusions and prospects for further use. The use of special tax regimes helps to optimize tax payments, and tax incentives reduce the tax burden of business entities. However, in the current conditions of the spread of the pandemic, increased attention from the state to small businesses is required in order to regulate the possible loss of profitability due to the introduction of restrictive measures, and, as a result, a decrease in the population's ability to pay, which, in turn, will negatively affect the replenishment of the country's budget with tax payments.

Sosialisasi Perpajakan Pada Pelaku Usaha UMKM Di Kota Cimahi

Community service activities are carried out on MSMEs assisted by the Cimahi city government, West Java. This activity is in the form of socializing the role of MSMEs in taxation and incentives for those affected by COVID-19. The goal is for MSMEs to understand their tax obligations, namely calculating, depositing and reporting taxes and taking advantage of tax incentives provided by the government for business actors affected by the COVID-19 pandemic. Incentives given to MSME actors by reducing the PPh rate (Final Income Tax) to 0.5% of total turnover, according to Government Regulation (PP) Number 23 of 2018 concerning Income Tax on income from businesses received or obtained by Taxpayers who have gross income certain. turnover. Then briefing on the extension of incentives due to this pandemic by utilizing the tax payment abolition facility with the DTP PPh Final mechanism as stated in PMK-82/PMK.03/2021. The implementation is carried out using a webinar mechanism in August 2021. The initial agenda for this activity is coordinated by the activity committee through the WhatsApp group by distributing flyers with the intention that the socialization activities carried out can be followed by the fostered MSME business actors. by the City Government of Cimahi. The output of this activity is to make MSME actors aware of their tax obligations for the business they run, understand how to utilize and use DTP Final Income Tax incentives and calculate, deposit and report taxes.