Complex Tax Research Articles

Effect of Transfer Pricing on Corporation Tax Compliance Among Multinational Corporations in Nairobi Kenya

Purpose: Tax is a compulsory contribution that is made by the citizens of a country to the government for the provision of public utilities. It is evident from the National Tax Policy, 2024 that the Kenya Revenue Authority (KRA) and the government at large have recently shown a lot of interest in multinationals due to the complexity of their operations and the tendency for them to come up with complex tax avoidance mechanisms. This has also been complicated by the widespread abuse of transfer pricing models adopted when dealing with multinational corporations operating in Kenya. This study looked into effect of transfer pricing on corporate tax compliance among multinational corporation companies in Kenya. The study was guided by the following theories, AS theory, the Slippery Slope Framework, and the theory of the planned behavior. Methodology: The study employed an explanatory research design. The target population was 221 multinational corporations’ companies and a sample size of 142 respondents. Questionnaires were used to collect primary data and analysis was descriptive statistics include frequency, percentage, and mean while inferential statistics included correlation and multiple regression. Results: The study findings found out most companies in Nairobi, Kenya have transfer pricing policies that are moderately but not adequately in line with domestic tax statutes. Most companies will use transfer pricing as a tool to reduce their tax liabilities. Further, KRA is moderately but not adequately efficient in monitoring and regulating transfer pricing practices in our company. Conclusion: The study results concluded that transfer pricing affects corporation tax compliance Based on the findings, the study recommends there is a need for exchange of information and more international collaborative efforts from a policy, legal, and academic front to address aggressive tax avoidance practices from MNCs. Therefore, future studies can be conducted on the impact of Dispute resolution mechanism on corporation tax performance.

Cognitive Reflection and Social Proof: Navigating Complex Tax Incentives for Retirement Savings

ABSTRACT As the population ages, the urgency to ensure financial security in retirement intensifies. Governments have introduced tax incentives to promote retirement savings, but their complexity could pose challenges. Navigating these complex tax incentives often requires both cognitive reflections, the ability to resist impulsive answers and consider an issue thoughtfully, and social proof, the influence of others’ endorsements on one’s decisions. This study investigates the roles of these factors on the utilization of intricate tax incentives designed for retirement savings. We conduct a survey-based experiment on Thai taxpayers with varied complexity rules and framing message scenarios. Our findings indicate that individuals with higher Cognitive Reflection Test (CRT) scores are more likely to select complex tax incentives. We further illustrate that cognitive reflection has a more substantial impact on the decision to engage in a complex tax incentive than social proof. This highlights the importance of intrinsic cognitive abilities in navigating complex financial decisions. We also establish that the influence of social proof is particularly significant among individuals with lower cognitive reflection scores, signifying a nuanced interplay between individual cognitive abilities and social influences. Our findings highlight the importance of accounting for cognitive abilities and social proof dynamics when crafting retirement saving incentives.

Tax Complexity and Firm Tax Evasion: A Cross-Country Investigation

This paper endeavours to investigate whether a complex tax system influences firms’ propensity toward tax evasion across countries. To achieve the objectives of this study, we utilised the World Bank Enterprise Survey and the World Bank’s Doing Business databases covering more than 46,000 companies from 83 countries. Our study revealed that the increased time required to pay taxes and higher total tax payments were associated with a greater extent and incidence of tax evasion among firms. The consistency of these benchmark regression results was proven through endogeneity analysis and several robustness tests. Furthermore, our heterogeneity analyses showed that the effect of tax complexity on firm tax evasion was more prominent in low- and lower-middle-income countries and also in the primary industry. These findings offer promising evidence for policymakers, particularly in low- and lower-middle-income countries where the majority of companies operate in the primary industry. Addressing the complexity of the tax system could potentially mitigate the adverse impact on tax evasion levels in these countries. Furthermore, our spatial analysis provides valuable insights, emphasising the potential impact of tax complexity in neighbouring countries and underscoring the necessity for policymakers in the home countries to strategise on harmonising and streamlining their tax systems.

Article: Digital Services Tax: Analytical View of Challenges and Successes in Kenya and the United Kingdom

The rapid expansion of digital services is dramatically reshaping the panorama of global taxation. This transformation is notably impacting multinational enterprises (MNEs) that operate in countries where they lack a physical presence. In this study, the authors focus the attention on the implications of digital services offered by these non-resident MNEs operating in the Republic of Kenya and the United Kingdom and representing developing and developed economies, respectively. The article delves into how the burgeoning digital economy challenges international tax laws by scrutinizing the implementation of the digital service tax (24DST) and highlighting the weaknesses of the two-pillar plan in comprehensively addressing the digitalization of the economy. It also broadens the comprehension of the unique obstacles and potential opportunities inherent in the digital economy from an international taxation perspective. The significance of this research lies in its potential to inform tax policy in an increasingly digitalized global economy. Policymakers can develop strategies that are more effective in ensuring fair taxation practices by understanding the nuanced interactions between digital services and international tax regulations. Additionally, MNEs can use this research to better navigate the complex tax implications of their digital services in various economic contexts and thereby foster sustainable and ethical business practices. Digital economy, digital service tax (DST), Kenya, multinational enterprises (MNEs), organisation for economic co-operation and development (OECD), pillar one and pillar two, taxation, tax base, unilateral tax measure, United Kingdom (UK).

IRS Enforcement and Voluntary Tax Disclosure

ABSTRACT Although voluntary tax disclosures can improve firms’ information environments and reduce financial statement users’ costs of processing complex tax information, they can also inform tax authorities about tax avoidance strategies. This study explores the content of voluntary tax disclosures during quarterly earnings announcements and conference calls to examine the effect of IRS enforcement on managers’ voluntary tax disclosure decisions. We estimate a negative relation between IRS enforcement and voluntary tax disclosures that is concentrated in the subset of firms with high levels of tax avoidance. These results are consistent with managers having concerns about the potential costs of voluntary disclosures to tax authorities. In supplemental analysis, we find results consistent with voluntary tax disclosures benefiting analysts, but at the cost of increasing IRS attention. Collectively, our results suggest an unintended negative effect of IRS enforcement on the information environment. Data Availability: Data are available from the sources cited in the text. JEL Classifications: H25; M41; M48.

CROSS-BORDER TAX CHALLENGES AND SOLUTIONS IN GLOBAL FINANCE

In the dynamic landscape of global finance, cross-border transactions have become increasingly prevalent, facilitating economic growth and international trade. However, accompanying this expansion are complex tax challenges that both multinational corporations and governments encounter. This abstract delves into the multifaceted issues arising from cross-border taxation and explores potential solutions to mitigate these challenges effectively. One of the primary concerns in cross-border taxation is the issue of base erosion and profit shifting (BEPS), where multinational enterprises exploit gaps and mismatches in tax rules to artificially shift profits to low-tax jurisdictions, thereby eroding the tax base of higher-tax jurisdictions. Such practices not only lead to revenue losses for governments but also create an uneven playing field for businesses. Furthermore, navigating the intricate web of international tax treaties and agreements poses significant hurdles for taxpayers and tax authorities alike. The lack of uniformity in tax regulations across jurisdictions often results in ambiguity and disputes regarding the allocation of taxing rights and the determination of taxable income. Addressing these challenges requires a comprehensive approach that incorporates both policy reforms and international cooperation. Implementing measures such as the OECD/G20 BEPS project, which aims to modernize international tax rules and combat tax avoidance strategies, is crucial. Additionally, enhancing transparency through initiatives like country-by-country reporting enables tax authorities to gain insights into the global operations of multinational corporations, thereby facilitating more effective enforcement of tax laws. Moreover, fostering collaboration among nations through information exchange agreements and multilateral frameworks enhances the effectiveness of tax enforcement efforts and reduces opportunities for tax evasion. Embracing digitalization and leveraging technology tools can also streamline tax compliance processes and enhance the efficiency of cross-border tax administration. The complexities of cross-border taxation in global finance necessitate proactive measures to address BEPS, enhance tax transparency, and promote international cooperation. By implementing comprehensive strategies that blend policy reforms with technological innovations, stakeholders can navigate the challenges posed by cross-border taxation while fostering a fair and conducive environment for sustainable economic growth.
 Keywords: Cross-Border, Tax, Environment, Sustainable, Economy, Review.

Tax Compliance in Slovenia: An Empirical Assessment of Tax Knowledge and Fairness Perception

Complex tax systems can result in tax evasion, which further impacts the revenues necessary to achieve sustainable development goals. Enhancing taxpayer education, tax knowledge, and tax fairness perception is essential for boosting revenues to support societal sustainability. The aim of this study was to assess the levels of tax knowledge and tax fairness perception within the Slovene taxpayer population, with a specific focus on the differences related to gender and settlement size. Further, the connections between tax knowledge and various aspects of tax fairness were explored. The Kruskal–Wallis test was used to assess the statistical significance of gender and settlement size differences and the Kendall’s coefficient of rank to determine the association between the tax knowledge and fairness perception dimensions. The results provide evidence that highlights disparities in tax knowledge between male and female taxpayers (p-value = 0.0116). Additionally, this study demonstrates that settlement size does not significantly impact tax knowledge perception among Slovene taxpayers (p-value = 0.2067). However, tax fairness encompasses various dimensions, and our research reveals no disparities based on gender (p-value = 0.7263) or settlement size (p-value = 0.2786). When assessing the correlation between tax knowledge and tax fairness perception, the results indicate statistically significant but weak correlations in both directions, depending on the specific fairness dimension.

Tax Aggressiveness and Corporate Financialization in Brazil

Objective: This study investigates the relationship between tax aggressiveness and corporate financialization in companies listed on Brazil's B3 Stock Exchange from 2009 to 2022.
 Method: We employed a panel linear regression model, adjusting for fixed effects related to individual companies and specific years. We used metrics such as abnormal book tax differences (BTDA), effective tax rate (ETR), and Comprehensive Value-Added Tax Rate (CVATR) to measure tax aggressiveness.
 Results: Our findings show a positive correlation between tax aggressiveness and corporate financialization. Firms employing aggressive tax strategies exhibited increased financialization. For robustness, dummy variables targeting aggressively taxed firms were introduced, confirming the initial relationship. CVATR emerged as a particularly effective metric in the Brazilian context due to its complex tax structure.
 Originality/Relevance: This study is pioneering in exploring the nexus between tax aggressiveness and corporate financialization in Brazil, contributing valuable insights for local researchers, investors, policymakers, and financial analysts.
 Theoretical/Methodological Contributions: Our research introduces innovative approaches for measuring financial assets tailored to Brazil's unique market conditions. It also enriches the current body of literature by confirming CVATR as an effective metric for capturing tax aggressiveness in Brazil.

Analysis of the Influence of Institutional Ownership, Sales Growth, Profitability, and Company Size on Tax Avoidance

Aims: To determine and examine the effect of institutional ownership, sales growth, profitability, and company size on tax avoidance in Industrial Sector Companies listed on the Indonesia Stock Exchange.
 Studi Design: quantitative research.
 Place and Duration of Study: Industrial Sector companies listed on the Indonesia Stock Exchange for the period 2017 to 2021.
 Methodology: The population used in this study are industrial sector companies listed on the Indonesia Stock Exchange (IDX) from 2017 to 2021, with a total of 54 companies. The data is collected using the documentation technique, then sampling is carried out using the purposive sampling method, meaning that the sample selection is based on certain criteria, 15 companies are obtained which will be analyzed over 5 years, totaling 75. However, there are 18 outlier data after the normality test is carried out so the number of samples is 57, and data analysis uses multiple linear regression analysis using SPSS version 24.
 Results: institutional ownership, sales growth, and company size do not have an impact on tax avoidance. However, profitability has a negative effect on tax avoidance. This implies that a high level of profitability indicates a decrease in tax avoidance practices by businesses, as some companies tend to prioritize profitability and cash flow over complex tax strategies.
 Conclusion: This research, should be able to serve as a view for companies or corporate taxpayers in making decisions, especially regarding tax planning in the Company. Further researchers are recommended to add research periods and more varied variables apart from the four independent variables that have been used in this study.

Perspectives on reforming the tobacco tax administration system in Bangladesh to enhance public health

BackgroundTaxation is the most cost-effective instrument to regulate the consumption of tobacco products. However, weak tax administration can compromise the effectiveness of taxation. This paper aimed to understand the process...

АНАЛІЗ ВПЛИВУ ПОДАТКОВИХ ПЛАТЕЖІВ НА ФІНАНСОВИЙ СТАН АГРОБІЗНЕСУ

Existing problems in the Ukrainian economy are often related to the tax system, namely the existing tools for tax regulation of agribusiness activities. Taxation is an important component of the system of financial regulation of the development of agro-industrial production, one of the levers of influence on solving problems related to the social importance of agriculture. Gradually, the country is trying to change, in particular by revising the norms of the Tax Law. The article examines the financial condition and structure of agribusiness under the influence of tax payments. Tax aspects of state regulation of agribusiness are analyzed. The composition and nature of the influence of tax payments on the state of agribusiness is substantiated. It has been proven that the current tax mechanism is too loyal to some taxpayers, as a result of which the budget of Ukraine does not receive a large share of income in the form of tax revenues, and small agricultural producers are forced to "survive" every time in such a competitive environment. Also, the study showed that tax payments have a negative impact on the financial condition of the agricultural sector of Ukraine. High tax rates lead to: a decrease in the profit and profitability of agricultural enterprises; decrease in investments in the agricultural sector; increase in the debt burden of agricultural enterprises; decrease in the competitiveness of Ukrainian farmers on the world market. Attention is focused on the urgency of implementing European experience and stabilizing the general picture of the financial state of agribusiness. Experts in this area claim that high tax rates and complex tax rules create a significant burden for agricultural enterprises, which can negatively affect their profitability, investment activity and competitiveness. We come to the conclusion that reforms of the tax system of Ukraine are necessary to stimulate the development of the agricultural sector and improve its competitiveness. Reforms should include, first of all, lowering tax rates on agricultural products and services, then simplifying tax rules and procedures, introducing tax incentives for investments in the agricultural sector, ensuring access to preferential loans for agricultural enterprises.

Tax Administration in Nigeria: A Systematic Literature Review

Tax administration is vital for national development, acting as the principal vehicle through which governments generate revenue for economic growth and public service delivery. In Nigeria, tax collection is administered by the Federal Inland Revenue Service (FIRS), State Internal Revenue Service (SIRS), and Local Government Revenue authorities. These entities gather funds to support crucial infrastructure, healthcare, education, and other critical services. However, Nigeria faces significant challenges in tax administration, including rampant tax evasion, a substantial untaxed informal sector, corruption, and complex tax legislation. These issues hinder the government's capacity to generate sufficient revenue for national development. This systematic review analyzes the existing literature on tax administration in Nigeria from 2018 to 2024, addressing three key questions: (i) What are the primary obstacles in tax administration? (ii) How does tax administration influence government performance and revenue generation? (iii) What measures have been suggested or implemented to improve tax administration efficiency? Through a comprehensive search of databases such as Research gate, PubMed, JSTOR, Google Scholar, and others, this study finds noteworthy discoveries linked to recent tax reforms, such as the implementation of the Tax Identification Number (TIN) system and the Voluntary Assets and Income Declaration Scheme (VAIDS), have had a mixed impact on revenue generation. The use of technology, including e-tax systems, has enhanced tax compliance but faces challenges related to internet connectivity and cyber security. Additionally, the informal sector remains largely untaxed, posing a significant challenge to expanding the tax base. The implications of these findings highlight the need for further reforms in tax administration. Streamlining tax regulations, enhancing technological infrastructure, combating corruption, and improving taxpayer education are essential steps for increasing revenue collection. Addressing these challenges will not only boost revenue generation but also promote sustainable economic growth in Nigeria. Policymakers and stakeholders can leverage these insights to build a more efficient and transparent tax system, thereby contributing to overall economic and social stability.

인공지능(AI) 기술의 세무업무 활용과 과제

Information and communication technology (ICT) is being utilized in various places, mainly in the Internet of Things (hereinafter referred to as IoT), depending on the degree of its development. Among these new technologies, artificial intelligence (AI) technology is progressing rapidly, and mobile-based translation apps and Internet recommendation functions are already in use in our surroundings. In line with this, tax authorities are moving tax procedures online through the enactment of laws and implementation of systems related to the construction of tax administration using ICT.
 It is not only silk tax accountants who are being forced to innovate due to the development of AI technology characterized by advanced information processing, but also professionals such as lawyers, legal consultants, and administrative consultants should establish their own duties. . In particular, since the tax field is related to a wide range of fields including individuals and companies, there is a need to seek bolder cooperation. Along with this, there is a need to actively utilize AI technology to improve operational efficiency. In the future, rather than AI taking away human jobs, I think AI will be left with simple tasks that it can do well, and tax accountants will concentrate on tasks that require advanced skills that only humans can do.
 Article 1 of the “Tax Judiciary” clearly states that the purpose is to establish a tax consultant system and ensure the smooth implementation of tax administration and the proper fulfillment of tax obligations. As long as there is a self-assessment tax system, it is important for our tax accountants to raise the public's tax awareness and encourage taxpayers to declare and pay their taxes. In addition, tax accountants, acting as taxpayers' agents, must deal with complex tax systems and ensure that appropriate tax payments are made even in cases where opinions differ on non-obvious issues. It is expected that some of the tax services that fall under the category of ancillary services will disappear. In the future, tax representation, tax document preparation, tax consultation, and the preparation of tax documents, which are the exclusive services of tax accountants, may no longer be necessary for tax returns that do not require complex tax procedures. Tax accountants, who perform tax-related representation and other activities in response to taxpayers' requests, will have to understand the demands of taxpayers over time and assume a new social role.

Tax aggressiveness and auditor switching

In Brazil's complex tax landscape, this study examines the link between tax aggressiveness and auditor switches among B3-listed companies. Analyzing data from 2012 to 2022, we find heightened tax aggressiveness reduces the propensity for voluntary auditor changes. Yet, during crises or under Big 4 auditing, this inclination shifts. These findings spotlight Brazil's unique corporate dynamics, differing from global trends, and emphasize the importance of understanding tax strategies and auditor behaviors within Brazil's unique market context.

A Critical Analysis of Pakistan's Budget 2023-24: The Fiscal Challenges

The paper presents a comprehensive analysis of Pakistan's Budget 2023-24 and its fiscal landscape, sketching the challenges and opportunities within its revenue generation, economic growth, and debt management. The primary challenge facing Pakistan’s economy is the gap between government revenue and expenditures. The country faces hurdles in tax collection, marked by a complex tax system, tax evasion, and discrepancies impacting the middle and lower-income classes. A mixed research method was used in conducting this study, analysis of fiscal data, extensive literature review, and consultations with economic experts. An in-depth analysis of Pakistan's revenue sources, inflationary trends, budget deficits, and global economic conditions was conducted. The results show a complex web of challenges in Pakistan's fiscal framework, the gap between revenue collection and government spending, high inflation rates, the imbalance between exports and imports, encircling tax evasion, and an intricate tax system. The paper offers a sequence of strategic reforms, emphasizing expense reduction, tax simplification policy, political and legislative reforms, and encouraging investment for economic stability. It also highlights the need for coordination among government organizations, strategies to attract Foreign Direct Investment (FDI), and endorsing Human Resource Development (HRD) for a skilled workforce. The analysis highlights the importance of reforms in the governance structure, taxation system, and spending to achieve stability and economic growth in the country.

Factors influencing Voluntary Tax Compliance Among Small and Medium sized Enterprises in Kenya

Tax compliance is essential for generating revenue to fund government activities and public services. Despite the efforts of the Kenyan Revenue Authority (KRA), compliance remains a challenge due to factors such as complex tax systems, high compliance costs, and negative taxpayer attitudes. The study examines the factors that influence voluntary tax compliance, including information availability, tax compliance costs, and individual attitudes and perceptions. It delves into tax compliance theories, such as the Contingency Theory of Taxation and the Ability to Pay Theory, shedding light on their impact on organizational behavior and financial performance. Empirical evidence from previous studies is discussed, highlighting the importance of tax education and the perception of tax fairness in promoting compliance. The study also identifies challenges specific to Kenya, such as a complex tax system, high compliance costs, and negative attitudes toward taxation, which hinder compliance, particularly among SMEs. It underscores the efforts made by the Kenyan Revenue Authority (KRA) to enhance compliance but acknowledges the persistence of challenges. The abstract concludes by emphasizing the need for a comprehensive understanding of tax compliance to ensure an equitable and efficient tax system that supports economic growth and national development in Kenya and other developing nations.

Managing asynchronous workloads in a multi‐tenant microservice enterprise environment

AbstractA multi‐tenant microservice architecture involving components with asynchronous interactions and batch jobs requires efficient strategies for managing asynchronous workloads. This article addresses this issue in the context of a leading company developing tax software solutions for many national and multi‐national corporations in Brazil. A critical process provided by the company's cloud‐based solutions encompasses tax integration, which includes coordinating complex tax calculation tasks and needs to be supported by asynchronous operations using a message broker to guarantee order correctness. We explored and implemented two approaches for managing asynchronous workloads related to tax integration within a multi‐tenant microservice architecture in the company's context: (i) a polling‐based approach that employs a queue as a distributed lock (DL) and (ii) a push‐based approach named single active consumer (SAC) that relies on the message broker's logic to deliver messages. These approaches aim to achieve efficient resource allocation when dealing with a growing number of container replicas and tenants. In this article, we evaluate the correctness and performance of the DL and SAC approaches to shed light on how asynchronous workloads impact the management of multi‐tenant microservice architectures from delivery and deployment perspectives.

Implementing Marketing Strategies in the Tax Preparation Business

Tax preparation businesses are crucial in helping individuals and companies understand and comply with complex tax regulations. However, tax preparation businesses need to adopt relevant and innovative marketing strategies in the digital era and with increasing competition. This research aims to explore and analyze the implementation of effective marketing strategies in the context of tax preparation business. This research uses a qualitative approach with descriptive methods. The research results show that implementing marketing strategies in the tax preparation business positively impacts increasing brand presence, attracting new customers, and achieving business growth. Using a combination of digital and offline marketing strategies, including content marketing and an active presence on social media, has proven effective in reaching a wider audience. SMART goal setting and KPI measurement help measure marketing campaigns' success, while data analysis through tools like Google Analytics provides valuable insights into customer behavior and market trends. Furthermore, calculating return on investment (ROI) allows businesses to allocate budgets efficiently, identify the most effective marketing channels, and improve the sustainability of growth.

Fostering a Culture of Voluntary Tax Compliance among the Construction Contractors; Drivers and Barriers at Firm and Policy Level

Effective tax money collection is crucial for any modern sphere of economic development. This research explores the unique challenges faced by construction contractors in meeting tax obligations and the factors that drive their compliance behavior. The study investigates the reasons behind noncompliance, including factors such as complex tax codes, financial constraints, inadequate knowledge and understanding of tax requirements, and perceived unfairness in the tax system. Additionally, the research explores factors that can encourage contractors to voluntarily comply with tax obligations, such as the benefits of maintaining a good reputation, avoiding penalties, and accessing government incentives. A literature survey was undertaken to identify drivers and barriers behind voluntary tax compliance. A questionnaire was piloted on five (5) senior construction practitioners those who have more than 25 years working experience to establish the appropriateness of the questions and alleviate the inconsistencies, if any. A structured questionnaire survey was subsequently carried out to test the reality on the ground. Based on the findings, the study suggests 13 key determinants inspiring voluntary tax compliance, 8 drivers that effectively encourage voluntary tax compliance and 19 reasons behind tax evasion in the construction industry. By addressing these drivers and barriers, this research aims to foster a tax system that enhances voluntary compliance at two tiers namely, firm and policy.

The morality and tax avoidance: A sentiment and position taking analysis.

This paper examines the moral and legal underpinnings of corporate tax avoidance. Cast in terms of a totemic symbol that brand tax avoidance as within the purview of the law, the paper invokes the attributional frames of the new sociology of morality to examine the position of both the moral advocates and the amoral critics of aggressive tax avoidance. The paper uses the United Kingdom as a jurisdiction where complex tax planning by tax advisors serves as a measure of protection for corporations who may have already conceived that they are paying too much tax. Data for the paper came from semi-structured interviews conducted with tax accountants, consultants, parliamentarians, and government officials. To supplement the interviews, data from the Parliamentary Commission on Banking Standards were collected and analyzed to provide useful insights. The findings reveal that through effective tax planning, companies can reduce the present values of future tax payments. Given the singular justification of their actions within the contours of the tax rules, the moral culpability of organized tax avoidance is minimized, with very little liability attached. Tax avoidance is a morally charged area that is slowly drifting away from conventional social norms of what is right or wrong. It is hard not to see those in charge of tax regulation not using the findings of this paper to provide a more nuanced understanding of the intractable problems associated with corporate tax avoidance and use it as a reference point for regulatory reforms.