Compliance Costs Research Articles

An accounting perspective on the IFRS sustainability reporting standards for greenhouse gas emissions: implications for the Asia Pacific

ABSTRACT From an accounting perspective, we critically review the IFRS sustainability standards regarding its acceptability. The sustainability standards have serious implementation issues due to (1) their lack of financial reporting framework; (2) high compliance cost issues, particularly for entities in developing countries; (3) forward-looking disclosure requirements; (4) triple cost burden for the measurement, attestation and increased audit involvement for GHG emissions; (5) the possibility of compromised audit quality; and (6) issues with financed emissions. IFRS does not have accounting standards for recognizing, measuring and presenting climate-related financial statement items. As a result, diverse methods for climate-related accounting are practiced. IFRS must set GHG-related accounting standards to culminate the goal of integrating sustainability reporting into the financial reporting framework. In the Appendix, we developed two illustrative examples as temporary guidance to help the regulated entities recognize GHG-related financial statement items until IFRS releases the standards.

Environmental regulation and firms' trans-regional investment: Evidence from the implementation of the New Environmental Protection Law

Most literary works delve into the environmental consequences of the New Environmental Protection Law, widely regarded as the most stringent ecological protection legislation ever enacted. This study examines the relationship between implementing the New Environmental Protection Law and the cross-regional investment activities of firms. This study utilizes a difference-in-differences methodology to investigate the economic effects and underlying mechanisms from 2011 to 2022. The findings indicate that implementing the New Environmental Protection Law can reduce cross-regional investment by firms, with the cost of compliance playing a crucial role. The findings enhance the current research paradigm about the behavior of small businesses.

Analysis of the Effect of Environmental Regulation on Eco-Efficiency of Service Sector

The green transformation of the service sector is crucial for promoting the construction of ecological civilization and boosting high-quality development. The aim of the relationship between environmental regulation and eco-efficiency is to explore the path of the green transformation of the service sector. Based on the provincial data in China from 2001~2019, this study investigated the effect of environmental regulation on the eco-efficiency of the service sector, concentrating on the influencing mechanism and threshold effect of environmental regulation on the eco-efficiency of the largest service sector in the Chinese economy. Applying the panel OLS model, mediating model, and threshold effect model. The main findings are as follows. First, environmental regulation is not beneficial for boosting the eco-efficiency of the service sector because of compliance costs. Second, environmental regulation can reduce the eco-efficiency of the service sector through service agglomeration. However, the effect of innovation compensation can hinder the negative influence of environmental regulation on the eco-efficiency of the service sector. Third, the inhibiting effect of environmental regulation disappears non-linearly with boosting economic development. Conversely, the positive influence of environmental regulation becomes negative, along with improving service agglomeration. At last, this study provided recommendations for the policymakers who hope to accelerate the green transformation of the service sector from the perspectives of strengthening technological innovation, reducing agglomeration, and establishing coordinated development mechanisms.

Perception on Tax System Structure, Tax Compliance Costs and Tax Compliance Behaviour in Yemen

This study considered the tax system structure into tax penalty, tax rate, and tax audit, and then examined their effects on tax compliance behaviour among small and mediumsized enterprises (SMEs) in the manufacturing sector of Yemen. Also, the tax compliance cost in Yemen was considered as a mediating factor in the tax system structure and tax compliance model. The study used a survey questionnaire to collect data based on previous studies. The study empirically found a strong positive and significant association between the tax rate, tax penalty, and tax audit and manufacturing SME tax compliance behaviour in Yemen. Whereas tax compliance cost is negatively related to tax compliance behaviour. For the mediation effect, only the relationship between two factors, that is tax rate and tax penalty with tax compliance behaviour were mediated by of tax compliance costs. While no evidence for the mediating effect of tax compliance costs on the relationship between tax audit and the tax compliance behaviour is found. By referring to Deterrence Theory, this study has contributed by extending the tax literature through a framework that examined tax compliance cost as a mediator in the association between manufacturing SME tax compliance behavior in Yemen and the structure of the Yemeni tax system.

Impact of Blockchain Technology on Financial Reporting in Small and Medium-Sized Enterprises (SMEs) in Pakistan

Purpose: The aim of the study was to assess the impact of blockchain technology on financial reporting in small and medium-sized enterprises (SMEs) in Pakistan. Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: The study indicated that blockchain's decentralized ledger system enhances transparency and accuracy in financial data recording and reporting. It reduces the risk of fraud and manipulation due to its immutable nature, ensuring that transactions are securely recorded and traceable. This technology streamlines processes, such as auditing and reconciliation, leading to cost savings and increased efficiency for SMEs. Additionally, blockchain's real-time data availability improves decision-making capabilities and enhances trust among stakeholders. However, challenges such as regulatory compliance and implementation costs remain, requiring careful consideration for SMEs looking to adopt blockchain for financial reporting. Implications to Theory, Practice and Policy: Diffusion of innovations theory, agency theory and resource-based view may be used to anchor future studies on assessing the impact of blockchain technology on financial reporting in small and medium-sized enterprises (SMEs) in Pakistan. In practice, SMEs are encouraged to initiate pilot projects that leverage blockchain-based financial reporting solutions. On the policy front, advocating for regulatory clarity and supportive frameworks is essential to promote blockchain adoption among SMEs.

Impact of Financial Regulations on Bank Profitability in Uganda

Purpose: The aim of the study was to assess the impact of financial regulations on bank profitability in Uganda. Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: Financial regulations significantly influence bank profitability, primarily by affecting operational costs, risk management practices, and lending activities. Stricter capital requirements, such as those imposed by Basel III, generally enhance financial stability but may reduce profitability by limiting leverage and increasing the cost of compliance. Regulatory measures aimed at consumer protection and transparency, while beneficial for market integrity, can also impose additional administrative burdens and costs on banks. Conversely, deregulation periods often see increased profitability due to relaxed constraints on lending and investment activities. However, this can come at the expense of higher risk exposure and potential financial instability. Overall, the balance between regulatory stringency and bank profitability hinges on the specific regulations in place and the banks' ability to adapt and innovate within those frameworks. Implications to Theory, Practice and Policy: Agency theory, capital structure theory and information asymmetry theory may be used to anchor future studies on assessing the impact of financial regulations on bank profitability in Uganda. Practitioners should advocate for risk-based regulation that tailors regulatory requirements to banks' risk profiles and systemic importance. Policymakers should prioritize efforts to harmonize financial regulations across jurisdictions, especially in global banking hubs.

Taxing Times: Assets and Liabilities of the United Arab Emirates’ Corporate Tax Reform for the Financial Sector

The introduction of corporate taxation in 2022 and accompanying reforms are changing the paradigm of doing business in the United Arab Emirates and its free zones. The players in the UAE financial sector – foreign banks and their branches, investment funds and managers, fintech startups and others – are faced with increased compliance and other costs, but there are also many opportunities to seize for those in the know. This article provides an overview of UAE corporate tax reform with the financial sector perspective in focus and ends with key takeaways and steps to take to stay on top of them.

Drivers of Value Creation and the Effect of ESG Risk Rating on Investor Perceptions through Financial Metrics

This study delves deeply into the multifaceted nature of investor value creation, focusing on financial health, growth, profitability, cash flow, and ESG (environmental, social, and governance) risk ratings. The research employs partial least squares structural equation modeling (PLS-SEM) to dissect the interactions among these variables in a sample of 482 S&P 500 firms. Data were obtained from the FINRA database (2023) and Sustainalytics ESG risk ratings (2023). The results indicate that solid financial health enhances investor value creation. While growth fosters profitability, its direct impact on value creation and cash flow appears limited. The study also uncovers that ESG risk ratings negatively moderate the relationship between cash flow and value creation. This finding suggests that higher ESG risks lead to increased operational and compliance costs, which can reduce working capital and operating cash flow. Additionally, although sustainability investments may initially incur higher costs, they generate long-term value in terms of investment cash flow. A high perception of ESG risk can also raise financing costs, negatively impacting financial cash flow. These findings offer significant contributions to both academic theory and practical applications, shedding light on the complex interplay between financial and sustainability indicators in driving value creation for investors.

Energy Tax Exemptions and Industrial Production

Abstract This paper investigates the impact of a large electricity tax exemption on production levels, employment and input choices in the German manufacturing industry. For two policy designs, we show that exempted plants increase their electricity use. This effect is larger under a notched exemption policy, where passing an eligibility threshold yields infra-marginal benefits, compared to a policy without such benefits. We detect no significant impact of the exemptions on production levels, export shares and employment. Using counterfactual simulations, we document that notched policies substantially distort firms’ production input choices when financial stakes are high and compliance costs are low.

Exploring the Interplay of Tax Understanding, Compliance Costs, and Tax Compliance among Indonesian MSMEs: A Structural Equation Modeling Approach

Exploring the Interplay of Tax Understanding, Compliance Costs, and Tax Compliance among Indonesian MSMEs: A Structural Equation Modeling Approach

Do tax compliance costs mediate the relationship between the complexity of tax structure and fairness perceptions? Evidence from manufacturers

The phenomenon of tax fairness has been researched in the past with a host of dimensions and determinants. Tax fairness and attitudes towards compliance have majorly been affected by structural factors of taxation, of which a major component is the perceived complexity of the tax system. It has also been revealed by extant literature that compliance costs of taxation are critical indicators of how complex the taxation structure is in an economic system. At the outset, it becomes imperative to understand if the compliance costs of taxation play a role in serving as a causal link between tax compliance costs and fairness perceptions. The study employs a survey approach through a structured questionnaire to elicit responses on tax complexity, compliance costs and tax fairness perceptions. Structural equation modeling shows that there is a significant indirect effect of tax complexity on fairness perceptions through the mediating role of tax compliance costs.

Research on Tax Collection and Administration Efficiency in the Context of “Governing Taxation by Numbers”

In modern national governance systems, tax collection and administration efficiency is a key indicator to measure the performance of the tax system. With the proposal and implementation of the concept of “governing taxation through numbers”, how to use digital technology to improve tax collection and administration efficiency has become an important issue. Focusing on the background of the policy of “governing taxation by numbers”, this article selects Anhui Province as a case area to conduct an in-depth analysis of the impact of the policy of “governing taxation by numbers” on the efficiency of tax collection and administration in practical applications, and explores strategies to improve tax collection and administration efficiency, aiming to optimize Provide theoretical and practical reference for tax management, improving tax compliance and reducing collection costs.

The Impact of Tax Legislative Disruptions on the Increase of Informal Economic Activities in Egypt

The study examines how legislative instability in tax laws affects the growth of informal economic activities in Egypt. It suggests that unclear or unsustainable tax regulations drive a shift towards the informal sector, fueled by benefits like tax evasion and reduced compliance costs. To encourage voluntary integration, the study proposes measures such as transparent tax laws, awareness campaigns on tax compliance benefits, and simplification of procedures. It advocates for policymakers to prioritize creating an environment conducive to integration over punitive measures. By fostering a fair tax system and addressing underlying factors driving informality, Egypt can boost tax revenue, ensure fairness, and promote sustainable growth. Employing a descriptive-analytical approach, the study analyzes secondary data from official reports, academic literature, and relevant publications. This method allows for a systematic examination of tax legislative disruptions' impact on informal economic activities. It facilitates understanding the dynamics of tax regulations and their effects on informality by analyzing diverse information sources. This approach ensures reliable insights into the relationship between tax laws and the informal economy in Egypt.

Impact, Compliance, and Countermeasures in Relation to Data Breaches in Publicly Traded U.S. Companies

A data breach is the unauthorized disclosure of sensitive personal data, and it impacts millions of individuals annually in the United States, as reported by Privacy Rights Clearinghouse. These breaches jeopardize the physical safety of the individuals whose data are exposed and result in substantial economic losses for the affected companies. To diminish the frequency and severity of data breaches in the future, it is imperative to research their causes and explore preventive measures. In pursuit of this goal, this study considers a dataset of data breach incidents affecting companies listed on the New York Stock Exchange and NASDAQ. This dataset has been augmented with additional information regarding the targeted company. This paper employs statistical visualizations of the data to clarify these incidents and assess their consequences on the affected companies and individuals whose data were compromised. We then propose mitigation controls based on established frameworks such as the NIST Cybersecurity Framework. Additionally, this paper reviews the compliance scenario by examining the relevant laws and regulations applicable to each case, including SOX, HIPAA, GLBA, and PCI-DSS, and evaluates the impacts of data breaches on stock market prices. We also review guidelines for appropriately responding to data leaks in the U.S., for compliance achievement and cost reduction. By conducting this analysis, this work aims to contribute to a comprehensive understanding of data breaches and empower organizations to safeguard against them proactively, improving the technical quality of their basic services. To our knowledge, this is the first paper to address compliance with data protection regulations, security controls as countermeasures, financial impacts on stock prices, and incident response strategies. Although the discussion is focused on publicly traded companies in the United States, it may also apply to public and private companies worldwide.

Guidelines for a simplified Value-Added Tax Act

Purpose: The goal of the study is to provide guidelines for a simplified South African Value-Added Tax (VAT) Act. Motivation: The current VAT Act lacks logical structure and is therefore complex to teach, apply in practice and administer. The study on which this article reports investigated the structure of the VAT Act as an element of legal complexity. Design/Methodology/Approach: The research was conducted in two phases: a literature review, followed by semi-structured interviews. Main findings: Existing empirical studies confirm that the poor structure, layout and organisation of the VAT Act contribute to its complexity. In addition, research confirms that improvements to structure, layout and organisation enhance the readability of statutes. Interviewees agreed that the current incoherent structure of the VAT Act contributes to its complexity. The findings confirm that the complexity of the VAT Act raises compliance and administrative costs. Practical implications/Managerial impact: The literature review and interview findings contribute to the development of guidelines for a simplified South African VAT Act, which is the contribution of this study. The principles include adhering to a VAT vendor’s lifecycle, grouping sections together, introducing headings and subheadings, using clear signposting, employing international benchmarks and seeking a solution that addresses local challenges most effectively. Novelty/Contribution: One recommendation that stands out is to completely rewrite the VAT Act. As a first step in this rewrite project, it is recommended that an index be developed using the guidelines. This is an initial step towards simplification of the South African VAT Act.

Regulatory Framework of P2P Lending in India: Market Stability and Financial Inclusion Implications

Peer-to-peer (P2P) lending has revolutionized the financial industry by offering an alternative to conventional banking. It facilitates direct connections between lenders and borrowers via online platforms. This research paper examines the regulatory framework governing P2P lending in India, introduced by the Reserve Bank of India (RBI) in 2017, and its implications for market stability and financial inclusion. The study highlights the benefits of P2P lending, including greater acceptance, regional inclusivity, reduced costs, and faster loan approvals. It also explores the challenges posed by regulatory measures, such as caps on lending and borrowing, compliance costs, and operational hurdles, which can limit the impact on financial inclusion. The role of transparency in borrower information is analyzed, demonstrating how it influences loan interest rates, reduces adverse selection, and facilitates the formation of borrower groups based on credit ratings and social capital. Despite the significant benefits of enhanced transparency and regulatory oversight, the paper identifies ongoing challenges, including privacy concerns and information asymmetry. The findings underscore the need for continued regulatory refinement and collaboration among stakeholders to fully leverage the benefits of P2P lending in promoting financial inclusion and market stability in India. By addressing these challenges, P2P lending platforms can more effectively meet the credit needs of underserved populations, thereby contributing to a more inclusive financial system.

Проблемы регулирования цифровых платформ: трудности и возможности международного сотрудничества

Digital platforms act as private regulators of their ecosystems. However, until recently, these platforms have not been objects of regulation by the state. Currently, many jurisdictions adapt and update their consumer protection and competition policy instruments and introduce ex ante regulation to protect consumers and competition in digital markets. Regulatory problems derive from the nature of platforms’ business models, the transnational character of their operations, and the significant resources necessary to ensure regulation enforcement and monitoring. Coherence of regulatory approaches applied by different jurisdictions creates legal certainty, reduces costs of compliance and prices, and ensures consistency of requirements with regard to the quality of platforms’ services and user protection. Despite the advantages of policy coherence, cooperation develops slowly and is fragmented due to a contestation over the influence on the rules of governance. This article reviews the main problems and key approaches to the digital platforms’ regulation, and the challenges of, and perspectives on, international cooperation. The study draws on a survey of research articles, national documents on digital platforms policies and EU regulations, analytical materials of research centres and international organizations, and assessments of regulatory practices by concrete jurisdictions. The article explores problems and approaches to ensuring protection of users and fair competition, ex ante regulation application, and multilateral initiatives. In conclusion, the authors put forward some ideas on international cooperation perspectives.

Do environmental regulations affect firms’ investment decisions? Evidence from renewable energy policy

This paper studies whether climate transition risks affect manufacturing firms’ real investment decisions by exploiting the state-level adoption of the Renewable Portfolio Standards (RPS), a set of prominent energy and environmental regulations in the U.S. from 1984–2022. Using a staggered difference-in-differences analysis, we show that while these programs impose substantial compliance costs on emission sources and result in a marked increase in electricity prices, they do not alter manufacturers’ capital expenditures, mergers and acquisitions, and alliance formation. This finding survives a battery of robustness checks. It broadly persists in cross-sectional tests of firms with varied exposure to RPS, in different size groups, and with varying degrees of financial constraints, operating leverage, market competition, and corporate governance quality. Only manufacturing firms from more competitive markets reduce their capital expenditures after RPS’ adoption. Furthermore, our results show that RPS do not influence other firm decisions and outcomes, such as employment growth, innovation, and firm performance. Our study documents novel evidence of manufacturers’ notable resilience to transition risks associated with energy and environmental policies. Our findings provide implications for the debate on the benefits and costs of regulations tackling climate change and call for further research on firms’ climate adaptation strategies.

Interventions to Increase Affordable Care Act Marketplace Enrollment: A Systematic Review and Meta-Analysis.

Over 10 million uninsured individuals are eligible for subsidized health insurance coverage through the Affordable Care Act (ACA) marketplaces, and millions more were projected to become eligible with the end of the federal COVID-19 Public Health Emergency in 2023. Individual studies on behaviorally informed interventions designed to encourage enrollment suggest that some are more effective than others. This study summarizes evidence on the efficacy of these interventions and suggests which administrative burdens might be most relevant for potential enrollees. Published and unpublished studies were identified through a systematic review of studies assessing the impact of behaviorally informed interventions on ACA marketplace enrollment from 2014 to 2022. Thirty-four studies comprising over 18 million participants were included (32 randomized controlled trials and 2 quasiexperimental studies). At the time of data extraction, 8 were published. Twenty-seven of the studies qualified for inclusion in a meta-analysis, which found that the average rate of enrollment was about 1 percentage point higher for those who received an intervention (0.009, P < 0.001), a 24% increase relative to control households; for every 1000 people who receive an intervention, that would correspond to about 9 additional enrollees. When stratifying by intervention intensity, support-based interventions increased enrollment by 2 percentage points (0.020, P = 0.004), while information-based interventions increased enrollment by 0.6 percentage points (0.006, P < 0.001). The meta-analysis found that behaviorally informed interventions can increase ACA marketplace enrollment. Interventions aimed at alleviating compliance costs by providing enrollment support were about three times as effective as information alone.

Direct and vicarious administrative burden: Experiences of UK public services as Homes for Ukraine host

Abstract This article shows, through a study of hosts’ experiences of the UK’s Homes for Ukraine scheme, the ways in which sponsoring refugees can impose burdens on sponsors by virtue of the state’s administrative processes. Specifically, it shows how sponsors incur learning, compliance, and psychological costs from administrative burdens and that these burdens are encountered both directly, through their own engagements with public bodies, and vicariously, through the experiences of their guests. The article thus makes a significant contribution to the understanding of the ground-level experience of refugee sponsorship while also expanding the burgeoning theory of administrative burden by demonstrating the relevance of burdens experienced vicariously.