Tax avoidance and earnings management:a neural network approach for the largest European economies

In this study,we investigate the relationship between tax avoidance and earnings management in the largest five European Union economies by using artificial neural network regressions.This methodology allows us to deal with nonlinearities detected in the data,which is the principal contribution to the previous literature.We ana-lyzed Compustat data for Germany,the United Kingdom,France,Italy,and Spain for the 2006–2015 period,focusing on discretionary accruals.We considered three tax avoidance measures,two based on the effective tax rate(ETR)and one on book-tax differences(BTD).Our results indicate the presence of nonlinear patterns and a posi-tive,statistically significant relationship between discretionary accruals and both ETR indicators implying that when companies resort to earnings management,a larger tax-able income—and thus higher ETR and lesser tax avoidance–would ensue.Hence,as also highlighted by the fact that discretionary accruals do not appear to affect BTD,our evidence does not suggest that companies are exploiting tax manipulation to reduce their tax payments;thus,the gap between accounting and taxation seems largely unaf-fected by earnings management.

Factors That Influence Tax Avoidance in Indonesia Stock Exchange

The purpose of this study was to obtain empirical evidence about the influence of the proportion of independent commissioners, audit committee, audit quality, profitability, and firm size against the tax avoidance. This study used a sample of one hundred and fifty three samples. These results indicate that profitability has an influence on tax avoidance while the proportion of independent commissioners, audit committee, audit quality, and firm size have no influence on tax avoidance.

Does access to credit reduce SMEs’tax avoidance?Evidence from a regression discontinuity design

This study investigates the effect of targeted reserve requirement ratio cuts(TRRRCs)on tax avoidance among small and micro enterprises(SMEs)with operating revenues below specific cutoffs in China.Using a regression discontinuity design,we causally show that,by increasing loan availability,TRRRCs significantly alleviate the financial constraints and cash dependence of SMEs and consequently reduce tax avoidance.This is especially the case among firms with lower market power and higher entertainment and travel costs.Our findings provide evidence for the real effect of TRRRCs on corporate tax avoidance and show the inclusive effect of TRRRCs on SMEs.In doing so,we indirectly reveal a rent-seeking channel underlying bank lending,thus offering clear policy implications for regulators.

Corporate Governance and Tax Avoidance: Evidence from Nigerian Quoted Food and Beverage Companies

The study determine the effect of CEO duality on the effective tax rate of quoted foods and Beverage companies.Ex-post facto research design was adopted.A purposive sampling technique was applied in selecting nine(9)companies during the data collection process.Data were collected from annual reports and accounts of the sampled companies from 2013-2019.Data for the study analyzed using descriptive statistics and regression was used with aid of the e-view was at 95%confidence at five degrees of freedom(df).The result shows that CEO duality was significant and had a positive coefficient on tax planning of food and beverage companies in Nigeria.The study,therefore recommended that non-separation of CEO from Chairman of the Board may lead to higher levels of tax planning;and an opportunity for manager’s rent extraction,because of their dominating role to ensure that adequate oversight roles are separated.

Does Information Exchange Affect Cross-border Tax Avoidance? Evidence from the Common Reporting Standard

Using panel data from 2012 to 2020 for publicly traded Chinese companies, we explored the efficacy in mitigation of tax information asymmetry to combat profit shifting and transnational tax avoidance. Our empirical analysis revealed that, after the implementation of the inaugural multilateral automatic information exchange system known as the Common Reporting Standard, there was a statistically significantly increase in the effective tax rate by 1.4 percentage points, accompanied by an increase in instances of tax compliance. These trends were discernibly associated with a reduction in profit shifting and notable changes in reported profit margins, particularly influenced by actions related to debt shifting and strategic management of intellectual property assets. These findings underscore the strong connection between these effects and various factors such as investment destinations, asset portfolios, and industry classifications. The results imply a prospective decline in the incidence of cross-border tax avoidance by Chinese multinational entities and demonstrate the potential of emerging international tax cooperation frameworks for curbing the global tax avoidance practices of multinational corporations.

Empirical Examination of Market Reaction to Transfer Pricing Taxation Announcement in Press： A Japanese Perspective

The Japanese Taxation Agency （JTA） introduced transfer pricing taxation （TPT） in order to suppress the outflow of profits and therefore taxes of Japanese companies, which are expanding overseas. There have been many press reports regarding the application of TPT, and so there is much public attention on this issue. TPT is applied to unnatural transfer prices （TP）. If TPT is applied to a multinational company （MNC）, the company will need to bear enormous documentation costs in its calculation of the ratable price. In addition, in the last few years, the target of TPT is shifting to the overseas transfer of intangible assets, such as trademarks, royalties, patents, and charges income. As a result, companies have become more careful about TPT and investors tend to pay attention to companies＇ TPT strategy. With regard to this point, this paper examines how the market evaluates news regarding TP by investigating the market reaction to an initial press report mentioning that a firm was involved in a TP manipulation and may be guilty of tax underpayment. We examine these events both because press reports are currently under intense scrutiny and because there has been very little research on firms that engage in tax sheltering （see, e.g., Graham ＆ Tucker, 2006; Hanlon ＆ Slemrod, 2009）. Some view the fact that not all firms engage in tax sheltering as surprising because of the widespread view that shelters, at least in the 1990s, in expectation, offered a positive net present value position. The potential negative public relations effect is often cited as one reason for this ＂under-sheltering＂ phenomenon （Bankman, 2004）. On the event study analysis, we find that the Japanese capital market has shown a statistically significant negative reaction to the press reports. This result is due to a strong distrust of corporate activity regarding TP strategies. Moreover, in order to clarify the reason why the market responds to reports of TPT being applied, we compute the cumulative abnormal returns （CARs） around the date of the press report and conduct two-stage least-squares estimation to examine where this result regarding the market reaction comes from. Our results indicate that the variables for intangible assets and effective tax rate and the variables which represent the extent of corporate governance （CG） are statistically significant with respect to these reactions.

IPO suspension,financing uncertainty and corporate tax avoidance

The acquisition of external financing is an important factor affecting the development of enterprises and even the economic growth of a country.However,changes in the external environment often expose enterprises to uncertainties in obtaining external financing.Taking China’s initial public offering(IPO)suspension policy as a setting,this paper examines the impact of the associated external financing uncertainty on firms.The empirical results show that firms that are unable to secure planned financing due to the IPO suspension policy engage in greater tax avoidance activities than successful IPOs during the IPO suspension period;this phenomenon is mainly concentrated in firms that are not state-owned,have no venture capital or private equity backing,have lower debt servicing capacity and have lower tax avoidance risk.Moreover,the tax avoidance activities of enterprises positively influence their fixed asset investment and innovation investment during the IPO suspension period.Evidence based on IPO price performance indicates that investors respond positively to firms’tax avoidance practices during IPO suspensions.

Government social media and corporate tax avoidance

With the advent of the new media era,government social media have become an important paradigm for social governance.We perform a large-sample regression and reveal that the higher the quality of taxation bureaus’operation of government social media,the lower the degree of local enterprises’tax avoidance,which works through reducing tax avoidance incentives and increasing the difficulty of committing tax avoidance.Moreover,government social media play a substitution effect on tax enforcement and administration.We also find that government social media should focus on strengthening its official,formal and professional characteristics.Given the significant recent changes in how enterprises handle taxation,the proportion of information that taxation bureaus post on system operation should be appropriately increased.

Banking deregulation and corporate tax avoidance

We investigate whether tax avoidance substitutes for external financing. We exploit interstate banking deregulation as a quasi-external shock to examine whether firms engage in less tax avoidance after banking deregulation, because of cheaper and easier access to credit from banks. We find no empirical evidence to support this substitutive relation, even for firms with higher financial constraints or firms with higher external financing dependence.

A review of tax avoidance in China

This paper synthesizes the major empirical findings of the burgeoning tax avoidance research in China from the accounting,finance,and economics literature over the last 13 years.It surveys the evidence in four main areas:(1)the mechanisms through which Chinese firms avoid income taxes;(2)the effects of government ownership and agency problem on tax avoidance;(3)tax avoidance and political connections;and(4)the roles of book-tax conformity,tax enforcement,and corporate governance.It also discusses the appropriateness of tax avoidance measures in the Chinese setting.Finally,it proposes important directions for future research.

Spillover effects of VAT Self-enforcement properties:Evidence based on the replacement of business tax with VAT reform

In accordance with the purchasing tax-deduction method and the receiptbased value added tax(VAT)system,the same transaction can be recorded by two firms,which creates self-enforcement properties,thereby restraining tax avoidance.Using the Replacement of Business Tax with VAT reform in China,this paper adopts a difference-in-differences design to investigate the spillover effects of VAT self-enforcement properties on corporate income tax avoidance by manually collating information about suppliers/clients of listed firms.As the listed firms’suppliers/clients switch from paying business tax to paying VAT,there is a striking decline in their corporate income tax avoidance behavior.This effect is pronounced in firms with closer upstream and downstream correlations,higher information complexity and stronger incentives for tax avoidance.

Determinants of Tax Evasion Intention using the Theory of Planned Behavior and the Mediation role of Taxpayer Egoism

This study evaluates the mediation role of taxpayer egoism in the nexus between tax evasion intention(TEI)and its determinants.TEI is measured as a composite variable(for mediation in the PROCESS macro)and then as a latent variable(for mediation in Analysis of Moment Structure Software AMOS).Further,the stringent assumptions of mediation analysis by Baron and Kenny(Strategic,and Statistical Considerations 51:1173-1182,1986)are challenged via assertions by Hayes(Introduction to Mediation,Moderation and Conditional Process Analysis:A Regression-Based Approach,The Guilford Press,2018).The proxies for TEI are the respondents'ethical attitudes toward taxation Determinants of tax evasion intention are grouped into perceived behavioral control attitude and subjective norms as per theory of planned behavior(TPB)and extant literature.The detailed variables adopted from the literature include tax awareness,tax information,tax complexity,perceived power of authority,tax morals,tax fairness,and trust in government.A totalof 151 responses were collected Mediation analysis was done via bootstrapping in the PROCESS macro and through AMOS.A plethora of studies focus on determinants of tax evasion,tax compliance and their intentions However,none combine analysis via the two tools highlighted.Further,few challenge the old way of conducting mediation analysis The data provide statistical support for egoism's mediation in the effect of four determinants on tax evasion intention.It further confirms that many of the old preconditions for mediation are unnecessary given modern-day bootstrapping analysis.Insight into determinants of TEI and egoism have been provided However,this study uses cross-sectional data Future studies must use longitudinal data or experimental manipulation to infer more specific effects.