Abstract
The purpose of this study is to examine the moderating effect of non-audit services fees on the relationship between size, profitability, leverage, capital intensity, inventory intensity, financial distress and ethnicity with aggressive tax planning. This study uses a sample from companies listed on the Malaysian (Access, Certainty, Efficiency (ACE) Market from 2014 to 2018, comprising of 105 firm year-observations. The finding shows that the non-audit services fee moderate the relationship between size, profitability, leverage, inventory intensity, financial distress and ethnicity with aggressive tax planning except for capital intensity. It is hoped that the finding can assist readers in understanding the nature of companies listed on the ACE Market, particularly their behaviour towards tax planning. This study contributes to knowledge in the areas of financial accounting and taxation specifically on aggressive tax planning, by introducing the moderating variable of non-audit services fee. The uniqueness of the use of companies listed on the Malaysian ACE market will provide new avenue on the discussion on an aggressive tax planning issue, which usually more focus on big firms. The framework used in the present study could serve as a basis for research in other developing countries or regions.
Highlights
A growing body of academic research on aggressive tax planning has come to the fore in recent years and has been very important for industry players and academicians (Martinez, 2017)
Since a higher level of financial distress reduces the amount of tax paid by the companies, the presence of non-audit services (NAS) fee in such companies is expected to have a significant influence on the companies' aggressive tax planning activities
This study finds that the interaction of NAS fee strengthens the relationship between ethnicity and aggressive tax planning
Summary
A growing body of academic research on aggressive tax planning has come to the fore in recent years and has been very important for industry players and academicians (Martinez, 2017). Aggressive tax planning is known to be one of the ways that can be employed to minimize the tax burden, especially by corporate taxpayers (Wahab, Ariff, Marzuki, & Sanusi, 2017) This activity can be undertaken by companies that exploit any loophole in the tax law to gain tax advantage from the mismatch between the country's tax rules, which could lead to minimizing the tax burden, and subsequently, avoiding the payment of their fair share of taxes. Despite the long list of studies on aggressive tax planning activities undertaken by companies, the discussion shall continue as there are a lot of changes in the industries that worth to be researched for. These arguments, we considered introducing the non-audit services fee as a moderating variable to provide new avenue in the discussion of aggressive tax planning determinants.
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