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

Jahanbakhsh Ghafoori,Mahmood Rahmani

doi:10.20946/rad.v19i0.31985

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
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
3- Internal information environments with higher quality are effective on higher tax avoidance under restructuring condition

Summary

Introduction

Tax is the central instrument of obtaining income for realization of economic and social objectives. Deployment and variability of economic activities and the rising role of governments in establishment and development of public services, social support and improved deployment of government’s commitments in social and economic contexts have turned paying and receiving taxes into an effective and crucially important issue. Tax evasion is an officially illegal act but tax avoidance is somehow using the gaps in law for reduction of tax payments. In order to reduce this transfer of resources, managers undertake actions such as tax avoidance. Avoiding paying taxes is not related to those illegal activities which lead to reduction of government’s income which is spent on infrastructural affairs and social welfare services. Since a cost like tax can effectively reduce the gained benefits of a company, many companies undertake tax avoidance activities with the aim of reduction of their taxable income (Noor et al 2001). One of the reasons that firms undertake tax avoidance activities is its characteristic of being an alternative to debt (Graham and Tucker, 2006)

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