Tax Aggressiveness and Accounting and Financial Irregularities in Brazil

Abstract

This paper aimed to analyse whether tax aggressiveness increases the Company probability to incur in accounting and financial irregularities. It was used as a quantitative and descriptive methodology. To measure the aggressiveness level, it used General and Current Effective Tax Rate (ETR) and to estimate the results, Logit Regression. The population of this research were the Companies with shares on Stock Exchanges. The sample was the Brazilian Companies listed on B3 during de period 1999-2017, which corresponded to 4332 observations. Is was divided into two groups: one for treatment, and another for control. In the first one, some Companies committed irregularities which were object of an Administrative Processes Judged by the Security and Exchange Commission (SEC); the second, comprising the Companies that did not commit irregularities. The Companies data were taken from Economatica. The results showed evidence that the lower the tax aggressiveness, the less likely it is to committing irregularities. In other words, the more aggressive the company, the more likely it is to commit irregularities. Additionally, for the surveyed sample, the financial irregularities are influenced most by tax aggressiveness.