Impacts of Firms’ Internal Information Environment on Tax Avoidance (Case Study: Companies Listed in Tehran’s Stock Exchange)

Jahanbakhsh Ghafoori,Mahmood Rahmani

doi:10.7596/taksad.v6i1.708

Abstract

The main purpose of this study is to investigate the impacts of firms’ internal information environment on tax avoidance. The research method includes a data panel and is generally of semi-experimental fashion. The population of research is consisted of the entire companies and firms listed in Tehran’s stock exchange as 496 firms from the beginning of 2007 until the end of financial year of 2014. Among the population, a number of 86 firms were selected as the sample through systematic omitting method. For the purpose of data analysis, the tests of T and multivariate linear regression were incorporated into the study. Results indicate that impact of quality of internal information on tax avoidance is higher in those companies in which information play a more important role. Firms which operate under geographic dispersion make more use of the quality of their internal information, because this information helps them towards reduced tax avoidance. High quality of internal information and commercial dispersion force these firms towards avoiding larger taxes. In addition, quality of internal information is not effective on firms which are under reconstruction status.

Highlights

Tax is the central instrument of obtaining income for realization of economic and social objectives
Avoiding paying the real taxes is a major challenge for many countries and especially for developing countries. This issue results in reduced tax income and reduced transparency in economy
In support of better tax consequences, we have studied the role of IIQ and have taken a great step towards having a better recognition of tax avoidance

Summary

Introduction

Tax is the central instrument of obtaining income for realization of economic and social objectives. Evidence shows that quality of internal information play an important role in terms of consequences of task avoidance. Theories in this context show that companies with higher IIQ may be more capable in terms of recognition and application of strategies for cutting taxes. We expect companies with higher IIQ to be able to pursue desirable and risk-free tax avoidance consequences. This is because a higher and better IIQ can provide more support for documentation and static tax planning which in turn reduce the possibility of rejection of special tax solutions. In this research we are trying to investigate whether the internal information environment of companies is effective on tax avoidance among companies listed in Tehran’s stock exchange or not

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Conclusion