Lower Tax Rates Research Articles

FAKTOR-FAKTOR STRUKTUR MODAL MENURUT TRADE OFF THEORY

This study purposed to examine the effect of Corporate Tax Rate and Non Debt Tax Shield on their Capital Structure according to Trade Off Theory on manufacturing companies subsector metal and allied product that listed in Indonesia Stock Exchange for period 2016-2019.The study was conducted uing quantitative methods with an associative approach. The study population numbered 16 companies and 6 companies were sampled using purposive sampling. The study was conducted at manufacturing companies subsector metal and allied product that listed in Indonesia Stock Exchange for period 2016-2019. Classic assumption test using the test for normality, multicollinearity, autocorrelation, and heteroscedasticity. The regression analysis used is multiple linear regression analysis. Data was collected with the Financial Statement 2016-2019 and analyzed with IBM SPSS version 25.The results of this study indicate that the use of high debt to obtain a low corporate tax rate can cause a high risk for the company to go bankrupt, so the company prefers to use depreciation costs to obtain tax savings. If the depreciation cost of the company is high, the company can also reduce the use of debt. This shows that the higher the capital structure, the lower the corporate tax rate obtained by the company and the higher the NDTS, the lower the capital structure. In this study, there are still many limitations and shortcomings namely the influence of the independent variable on the dependent variable can only explain by 63,2%.

Pengaruh Perubahan Tarif Pajak Penghasilan, Struktur Modal Dan Kebijakan Dividen Terhadap Harga Saham

The purpose of this study is to analyze the effect of changes in income tax rates according to PP no. 30 of 2020, capital structure and dividend policy on stock prices in manufacturing companies in the Food and Beverage sector listed on the Indonesia Stock Exchange in 2016 –2020. This type of research uses descriptive quantitative. The population in this study were 30 companies. The sampling technique in this study was purposive sampling, so that a sample of 15 data from 3 companies was obtained for 5 years. Methods of data analysis using multiple linear regression analysis with the help of SPSS application. The results of the partial analysis show that the tax rate and dividend policy have no effect on stock prices. While the capital structure has a positive influence on stock prices. However, simultaneously stock prices are affected by changes in income tax rates, capital structure, and dividend policy. Based on the results of the study, it can be concluded that the high and low tax rates are not able to affect stock prices. the higher the capital structure will be followed by an increase in stock prices. While the dividend policy can not affect changes in stock prices.

Do Overlapped Audit Committee Directors Affect Tax Avoidance?

This research is motivated by the Omani government’s desire to reduce tax avoidance and bolster tax revenue collected from financial institutions. The purpose of this paper is to examine the impact of overlapped audit committee (AC) chairs and other directors on tax avoidance practice and whether they play a monitoring or advisory role in tax avoidance practice. As a measure of overlapped AC chairs, we used a dummy variable to indicate whether an AC chair sits on other committees within a company or not. We used the proportion of AC members who serve on the AC and other committees within a company as our proxy for overlapped AC directors. We used a company’s cash effective tax rate as a proxy for tax avoidance. We regressed tax avoidance on overlapped AC membership and other control variables, using a sample of 204 firm-year observations from financial institutions listed on the Muscat Stock Exchange between 2014 and 2019. Our regression results show that a higher proportion of overlapped AC members and the presence of an overlapped AC chair were both associated with lower effective tax rates, which equated to more tax avoidance. This suggests that these directors play an advisory role in the Omani context. We found, however, that these directors play a monitoring role when firms take a loss. From these findings, we draw important implications for regulators who need to rethink the potential consequences of having overlapped AC chairs and AC directors. Our study focuses on Omani financial institutions, which are highly regulated and monitored by the central bank, and our findings may not be directly applicable to non-financial institutions that are less regulated, so caution is needed when interpreting the findings. Further research could employ a repeated measured research design, such as ours, and explore the same research question in non-financial institutions.

Property Tax, Resource Allocation and Urban Production Efficiency

In 2011, Shanghai and Chongqing pioneered the property tax reform as pilot cities. Related studies mostly focus on the short-term impact of property tax on housing prices, land prices, finance and industry. Fewer researches pay attention to the impact of property tax policy, as the main mechanism of long-term regulation for the real estate market, on the long-term driving force of urban development in China. Taking Shanghai’s 2011 property tax reform as a quasi-natural experiment, this paper uses the synthetic control method to empirically test the actual impact of property tax on urban productivity in China. The results show that the property tax in Shanghai, owing to its relatively wider tax base and the transitional policy of “incremental levy and retrospective imposition”, has alleviated the irrational growth of housing prices, optimized the industrial capital allocation and labor allocation in Shanghai, and significantly improved the productivity of Shanghai.This paper may have the following contributions: （1） Using the synthetic control method, we prove that reasonable property tax policy has a positive spillover effect on urban economic efficiency. It enriches the research on the effect of property tax policy, and provides a new perspective for the path of urban productivity improvement. （2） We prove the specific mechanism of Shanghai property tax policy to promote productivity. Property tax can improve urban productivity by restraining speculative demand, especially alleviating the irrational rise of housing prices, and further improving the inter-industry capital allocation structure and labor employment structure. （3） Analyzing the policy detail of property tax in Shanghai and Chongqing, we provide further evidence for the advantages of using a wide tax base with low tax rate approach.

Production and emissions reduction decisions considering the differentiated carbon tax regulation across new and remanufactured products and consumer preference

The traditional carbon tax always causes the inequalities, and thus a differentiated carbon tax regulation across new and remanufactured products is introduced in this paper. To explore effects of the differentiated carbon tax on production and emissions reduction decisions, the environment and social welfare, this paper formulates a profit maximization model and presents some theoretical analysis and numerical analysis. The study results show that: (1) Under the differentiated carbon tax regulation, whether the rising base carbon tax rate is conducive to remanufacturing activities mainly depends on emissions advantages in remanufacturing, but a lower tax rate for remanufactured products would always promote remanufacturing activities. (2) A higher base carbon tax rate would improve the emissions reduction investment level when the emissions reduction effectiveness in remanufacturing is also better, and it is always beneficial to the environment. However, a lower tax rate for remanufactured products may decrease the emissions reduction investment level, and whether it could reduce total carbon emissions depends on emissions advantages in remanufacturing. (3) The higher the base carbon tax rate is, the lower the social welfare when the environmental damage coefficient is small, but a lower tax rate for remanufactured products would be always beneficial to social welfare.

Earnings Benchmarks and Enterprises’ Expenditure Manipulation：Evidence from Advertising Expenditures

Under the background of the new economic era, great changes have taken place in the business environment faced by enterprises. The business model of enterprises is changing from the “product-centered” model to the “customer-centered” model. In this trend, brand capital has become an essential factor for enterprises to form core competitiveness. As a long-term investment in brand, with the transformation of enterprise business model, the importance of advertising expenditures in enterprise brand building and value promotion is becoming increasingly prominent. Advertising expenditures are generally the research topic in the field of marketing. This paper extends it to the research field of accounting and corporate finance, trying to take advertising expenditures as the research object, uncover the “black box” of enterprise expense manipulation, and explore the enterprise expense manipulation behavior under different earnings benchmarks（avoiding a loss, avoiding an earnings decline, meeting analysts’ earnings forecasts）. And on this basis, we further explore the cross-sectional differences of advertising expenditure manipulation between different enterprises. The results show that enterprises will try to achieve the goal of avoiding a loss by cutting advertising expenditures. However, there is no evidence on enterprises’ advertising expenditure manipulation under the goal of avoiding an earnings decline or meeting analysts’ earnings forecasts. The above conclusions remain unchanged under various robustness tests. Further, the research on the cross-sectional differences of advertising expenditure manipulation to avoid a loss shows that advertising expenditure manipulation is more significant in enterprises with higher advertising expenditure intensity, shorter listing time, analyst tracking and lower tax rate. This paper not only makes a preliminary study on advertising expenditure manipulation in China’s capital market, explores whether advertising expenditures will be used as a means of earnings management under a variety of earnings benchmarks, enriches the academic literature in the field of expenditure manipulation in earnings management, and is helpful to understand the relationship between earnings benchmarks and expenditure manipulation; but also makes a thorough study on the cross-sectional differences of advertising expenditure manipulation under earnings benchmarks, which is helpful to reveal the mechanism behind the expenditure manipulation behavior, and has reference value and enlightenment significance to the subsequent scholars’ research in related fields. In addition, the conclusions of this paper can not only enlighten the participants and regulators of capital market in policy, but also have reference value to understand the relationship between earnings benchmarks and expenditure manipulation in practice.

INFLUENCE OF TRANSFER PRICES ON TAX EVASION

In recent years, transfer (internal) prices have become the subject of interest of many theorists and regulators, both for determining their effects on business and for the possibility of exploiting tax evasion. The foundations for the functioning of transfer pricing are given in the OECD guidelines, and further elaborated through national tax laws and regulations for their application. This regulatory framework treats all relevant entities, circumstances and conditions of transfer pricing, identification and explanation of transfer pricing methodology, and providing objective evidence on the application of the principle of independence and setting other conditions in transactions between related companies, all in order to prevent tax evasion and proven application of legal regulations in the field of transfer pricing. Since transfer prices are linked to decentralized related business entities consisting of parent companies and branches (organizational units or centers of responsibility) operating in the same or another country, tax evasion is done through the transfer of profits from a country with a high tax burden to a country with a lower tax rate. In addition, tax evasion is performed by reducing the tax base for value added tax, which is the difference between the transfer (non-market) price and the market price. Transfer price is formed using methods that are classified into two groups: classical transaction methods or transaction profit methods. Which method will be applied from these two groups depends on the adopted policy of the business entity. In principle, methods that are in line with the nature of the business of the business entity and that can determine the tax base in the most objective way should prevail. In practice, a method is chosen that results in maximizing profits and minimizing tax liabilities, which further leads to a better competitive position of the business entity, improvement of market position and increase of market shares. The subject of observation are all transactions between related parties on the basis of direct and indirect agreements, contracts, agreements and similar business relationships that affect the tax base, namely transactions with assets, services, financial transactions, capital transactions (purchase and sale of securities and shares ) and other similar transactions. The purpose of this paper is to investigate whether transfer prices are in line with the principle of marketability, regardless of the applied calculation method. The aim of this paper is to eliminate all possibilities of tax evasion in transactions between the parent company and subsidiaries within the group. In order to achieve the stated goal and purpose, the basic hypothesis of the work is set, which states that the application of different methods of calculating transfer prices affects the amount of the tax base. Proof of this hypothesis will be done on a case study example. The obtained results can serve as a basis for the commitment of the business entity for the appropriate method of calculating transfer prices. This excludes the individual goals of the business entity and the primacy given to one of the basic goals of taxation: achieving efficiency and fairness.

Debt Overhang, Gazelles’ Growth, and Fiscal Policy: A Note from the Quantile Regression Approach

The paper aims to examine the relationship between leverage and firm growth and the impact of fiscal policy on this relationship using a panel data quantile regression approach. Employing a sample of gazelles from emerging Europe for the 2006–2014 period, we find that debt overhang negatively affects firm growth only for the lower growth quantiles. In addition, we found that the negative effect is higher for the gazelles located in countries with lower corporate income effective tax rates. However, for the higher growth quantiles, the impact of debt on firm growth is positive and statistically significant. Our results reconcile the mixed results of the previous studies and have practical implications for financing strategies in emerging markets.

Inequality and growth in the twenty‐first century

AbstractThis paper analyzes how economic growth can be caused by changes in the income distribution. Persson and Tabellini (1994, The American Economic Review, 84, 600‐621) argue that productivity‐induced income inequality leads to lower growth since distortionary taxes increase and harm capital accumulation. However, this prediction is often challenged empirically. This paper distinguishes between capital income inequality and inequality induced by differences in labor productivity. Greater capital income inequality leads to lower labor tax rates, leading to higher growth. Using data for OECD countries, subsequent growth is found to be positively related to capital income inequality, and negatively related to labor income inequality, as originally conjectured.

How do most low ETR firms avoid paying taxes?

Evidence suggests a large proportion of profitable U.S. firms have low effective tax rates (i.e., an ETR between 0 and 10%). Despite widespread interest in how firms avoid paying taxes, we do not know how most firms attain low ETRs and whether they are primarily benefiting from benign or aggressive tax positions. Using a research design that explicitly examines low ETR firms, we predict and find that the majority are primarily benefiting from a benign tax position: large net operating loss carryforwards (NOLs). We also find that large NOLs allow firms to persistently retain low ETRs year after year. In contrast, we find that multinationals and tax haven firms, which should have more opportunities for aggressive tax planning, have a lower probability of attaining a low ETR (relative to domestic and non-tax haven firms). Collectively, these findings suggest that the typical low ETR firm does not incur significant tax risk. Consistent with this, we find that low ETR firms accrue unrecognized tax benefits at a similar rate as firms that pay the statutory tax rate and do not experience higher future tax rate volatility. Overall, the results shed light on the profile of the average low ETR firm and provide evidence that the majority are utilizing large NOLs rather than aggressive tax planning.Supplementary InformationThe online version contains supplementary material available at 10.1007/s11142-021-09614-8.

Inheritance tax regimes: a comparison

This paper provides an overview of different inheritance tax regimes in selected European countries and the United States. We show that in the majority of countries the tax rate is related to the relationship between testator and the beneficiary as well as the value of the inherited assets. In most countries the transfer of wealth within families is treated preferentially (lower tax rates, tax exemptions and reliefs). This is particularly the case for business assets and family homes. The analysis further discusses the features and effects of inheritance tax regimes, which include behavioural responses of individuals and different distributional effects of an inheritance tax. Although the actual revenues of inheritance taxation are quite low in the selected countries, some indicators point to higher revenue potentials in the future. An appropriate design for inheritance taxation could further help to decelerate the increase in wealth inequality.

International Diversification, Tax Avoidance, and Chaebol: Evidence from Korea

Purpose – Utilizing a large sample of Korean firms, this study examines international diversification impacts on corporate tax avoidance and whether firms affiliated with large business groups (known in Korean as “chaebol”) reinforce the relationship between international diversification and tax avoidance. Design/methodology – This paper hypothesizes that 1) international diversification is likely to increase tax avoidance, 2) the positive effect of international diversification on tax avoidance is likely to be more pronounced for chaebol firms. We examine the hypotheses by using Korean firms listed in the Korean stock market between 2011 and 2016. We employ the number of foreign subsidiaries and the entropy index as proxies for international diversification and CASH ETR and GAAP ETR as proxies for tax avoidance. Findings – Our findings are summarized as follows. First, we have found that as firms are more internationally diversified, tax avoidance increases. It means that international diversification can be employed as a method of reducing the tax burden. Second, firms affiliated with chaebol are strengthened by the positive relation between international diversification and tax avoidance. It is interpreted that chaebol firms have more effective opportunities to reduce taxes than other firms. When entering foreign markets, they can share experience and resources to decrease taxation within the large business group. Originality/value – This study provides empirical evidence regarding the tax effect of international diversification. Unlike prior studies, international diversification is positively related to tax avoidance in Korea. In addition, we present additional evidence on the chaebol effects of international diversification on tax avoidance, in which they have an advantage to reduce taxes using transfer pricing through related party transactions, income shifting to low tax rate countries, and establishing subsidiaries in tax havens.

Income Tax Regime- Old Vs New

The Government of India has announced new tax slab in Union Budget 2020-21. This new tax slab is also called as Optional tax regime because Government has not abolished old tax regime. The tax payer has option to choose the tax regime i.e. either Old or New which is better for them. The new tax regime has lower tax slab as compared to old tax structure. The taxpayer has given an option to either choose new tax structure with lower tax slab or the old tax one with tax benefit but higher tax slabs. The old tax regime enable taxpayer to avail existing tax exemption such as Leave Travelling Allowance, House Rent Allowance & deductions available under Income Tax Act, 1961. While those who are opting new tax regime will not have to avail advantages of existing exemptions & deductions that are available under old tax regime. The old tax regime has higher tax rate and three tax slab, whereas new tax regime has lower tax rate & six tax slabs. There is similarity in tax rate in case of individual below 60 years of age in both tax regime as it is exempted up to 2.5 lakh. In addition to this as per Section 87A (Introduced in Finance Act, 2003) Individual who is resident of India for Income Tax purpose, is entitled to claim tax rebate up to Rs.12,500 against tax liability if his/her Income does not exceed Rs.5,00,000 for old as well as new tax regime. Keywords: Income Tax, Tax Slab, Exemptions, Deductions, Old Vs New Tax Regime.

The impact of IP box regimes on the M&A market

Intellectual property (IP) box regimes reward ownership of successful technology by imposing lower tax rates on income derived from IP relative to other sources of business income. Coupled with explicit provisions regarding the eligibility of acquired IP, IP boxes may affect merger and acquisition (M&A) incentives through multiple channels. Applying panel difference-in-differences, triple-differencing, and event study methods, we examine the effects of these modified incentives on the volume of M&A transactions and acquisition probabilities. In regimes with strict nexus requirements, reduced taxation of IP income is associated with reductions in the number of deals and the probability of being acquired for patent-owning firms due to the potential loss of eligibility for preferential taxation. This effect dissipates where nexus requirements are relaxed, and significant positive effects of IP box tax savings in more permissive regimes point to increased after-tax valuations of merger-driven synergies.

THE INFLUENCE OF TAXES, COMPANY SIZE, AND FOREIGN OWNERSHIP ON THE DECISION OF COMPANIES TO CONSIDER TRANSFER PRICING ON MANUFACTURING COMPANIES LISTED IN THE IDX

Transfer pricing has long been a classic issue in the taxation field. From the government side, transfer pricing is supposed to reduce and eliminate the potential for state tax revenue, because multinational companies shift the tax obligations of countries that have high tax rates (high tax countries) to countries with low tax rates (low tax countries). The purpose of this study is to fund out partially the effect of tax, company size, and foreign ownership on company decisions do transfer pricing. And to determine the effect of taxes, size foreign ownership in the company and simultaneously against the decision of the company do transfer pricing on manufacturing companies listed in Indonesia Stock Exchange period 2015-2019. The method used in this study is an associative method with a quantitative approach. The research population totals 183 companies with a sample of 11 companies, the financial report data attached 55 data using purposive sampling technique, the research was conducted at manufacturing companies in the Indonesia Stock Exchange period 2015-2019. The conclusion of the research is based on the above calculation partially, the results obtained by the tax and foreign ownership variable affect the company's decision to transfer pricing, while the variable company size does not affect the company's decision to transfer pricing. Simultaneously, the tax variables, company size, and foreign ownership affects the company's decision to transfer pricing to manufacturing companies in the Indonesia Stock Exchange period 2015-2019.

Pengaruh Tingkat Pendapatan, Penurunan Tarif, Dan Perubahan Cara Pembayaran Terhadap Kepatuhan Wajib Pajak UMKM Masa Pandemi Covid-19

This study aims to determine the effect of income levels, tariff reductions and changes in payment methods on MSME taxpayer compliance during the COVID-19 pandemic. Data collection techniques used questionnaires, observations, interviews, documentation and literature studies. The population in this study were all MSME taxpayers registered at KPP Pratama Tegal. The number of samples used as many as 50 respondents with the sampling method using purposive sampling method. The data analysis method used multiple linear regression analysis. The results of testing the first hypothesis show that the income level variable has an effect on MSME taxpayer compliance during the covid-19 pandemic. This shows that the higher the level of income received, the greater the compliance of MSME taxpayers. The results of testing the second hypothesis show that the rate reduction variable has no effect on MSME taxpayer compliance during the covid-19 pandemic. This shows that someone who does not comply with his obligations as a taxpayer, then even a low tax rate does not affect the level of compliance. The results of testing the third hypothesis show that the variable changes in payment methods affect MSME taxpayer compliance during the covid-19 pandemic. This means that changes in the method of paying taxes can improve MSME taxpayer compliance so that the easier the tax payment method used, the MSME taxpayer compliance will increase.

Management and Research of Enterprise Tax Planning under the Background of Information Age

With the improvement of the tax law and the increase in the cost of tax evasion, taxpayers’ legal awareness is getting stronger and stronger. This article mainly discusses the management of corporate tax planning under the background of the information age. Use data mining technology to achieve diversification of access methods and transparency of information access. If the company responsible for sales is located in a country or region that levies high income taxes, in this case, in order to reduce the tax burden, the company can establish branches in other countries and regions with lower income tax rates, making it should The profits of companies in high income tax areas can be effectively transferred, so that the total income tax payable by the company will be reduced, reducing the cost of taxation for the company. Companies can use commercial discounts when carrying out sales activities to reduce the value-added tax burden that companies should pay. After the enterprise reformed its tax planning, the value-added tax rate changed from the original business tax rate of 5% to 6%. This research is helpful to the reasonable planning of corporate taxation.

A Free-Market Environmentalist Transition toward Renewable Energy: The Cases of Germany, Denmark, and the United Kingdom

Renewable energy (RE) is one of the most popular public policy orientations worldwide. Compared to some other countries and continents, Europe has gained an early awareness of energy and environmental problems in general. At the theoretical level, free-market environmentalism indicates that based on the principle of private property rights, with fewer state interventionist and regulation policies, entrepreneurs, as the driving force of the market economy, can provide better services to meet the necessity of offering RE to protect the environment more effectively. Previous studies have revealed that Germany, Denmark, and the United Kingdom have made some progress in using the market to develop RE. However, this research did not analyze the three countries’ RE conditions from the perspective of free-market environmentalism. Based on our review of the principles of free-market environmentalism, this paper originally provides an empirical study of how Germany, Denmark, and the United Kingdom have partly conducted free-market-oriented policies to successfully achieve their policy goal of RE since the 1990s on a practical level. In particular, compared with Germany and Denmark, the UK has maintained a relatively low energy tax rate and opted for more pro-market measures since the Hayekian-Thatcherism free-market reform of 1979. The paper also discovers that Fredrich A. Hayek’s theories have strongly impacted its energy liberalization reform agenda since then. Low taxes on the energy industry and electricity have alleviated the burden on the electricity enterprises and consumers in the UK. Moreover, the empirical results above show that the energy enterprises play essential roles in providing better and more affordable RE for household and industrial users in the three sampled countries. Based on the above results, the paper also warns that state intervention policies such as taxation, state subsidies, and industrial access restrictions can impede these three countries’ RE targets. Additionally, our research provides reform agendas and policy suggestions to policymakers on the importance of implementing free-market environmentalism to provide more efficient RE in the post-COVID-19 era.

New Corporate Tax: Impact of Corporate Tax Cut on Indian Economy

On 20th December, 2019, the Central Government introduced the Taxation Laws (Amendment) Ordinance, 2019, which created a favourable taxing environment for the Companies. Through this Ordinance, section 115BAB, which covers all sorts of domestic companies, that is, any company formed and registered in India, was introduced in the Income Tax Act which offered a very low tax rate of 15% (17.5% including surcharge and cess) to the new manufacturing companies. This Ordinance also reduced the Tax rate for domestic companies to 22% (25.17% including surcharge and cess). Additionally under the new corporate assessment strategy, new organizations that set up assembling offices in India beginning in October and initiate creation before the finish of March, 2023 will be charged at a viable pace of 17%. This move did cause a rise in the value of the stock in India, but through this paper, we plan to delve deeper into how this new introduction affected the economy of India – ranging from the stock market to the value of rupees against dollar, the idea behind introducing this Ordinance, while also touching upon what is Corporate Tax and the Corporate Tax system that was present before the introduction of section 115BAB.

Tax aggressiveness and the proportion of quantitative information in income tax footnotes

PurposeThis paper aims to analyse the determinants of the proportion of quantitative data in financial statement footnote disclosures. Quantitative data represents “hard” information and has been considered to be more persuasive than qualitative data. The primary focus is on income tax footnotes because revenue agents use them as a reference in tax audits, and citizen groups use them to analyse tax inequalities. This study posits that firms with lower effective tax rates (“tax aggressive” firms) disclose less quantitative data in their income tax footnotes.Design/methodology/approachThe multivariate analysis uses data from the contents of income tax footnotes extracted from 10-K filings in eXtensible Business Reporting Language (XBRL). It uses the alphanumeric characters identified in the income tax footnotes to calculate the proportion of quantitative data relative to the entire footnote disclosure as the dependent variable in a multivariate regression analysis.FindingsThe findings show that firms which avoid more taxes disclose less quantitative data in income tax footnotes after controlling for the readability of the income tax footnotes and the entire annual report. Therefore, firms seem to reduce the publication of measurable data accessible to revenue agencies and citizen groups.Originality/valueThis analysis provides evidence that firms weigh the financial reporting requirements and tax audit risks when they disclose quantitative income tax data. Also, it supports the Financial Accounting Standards Board’s (FASB’s) proposal to require more disaggregated income tax disclosure. To the researcher’s knowledge, this is the first analysis that focuses on the determinants of disclosing quantitative data in income tax footnotes.