Tax Aggressiveness Research Articles

Data Breach Notification Laws and Corporate Tax Planning

ABSTRACTThis study explores the impact of data breaches on corporate tax planning in the United States. The results reveal that when a firm's headquarter is located in a state that has adopted a data breach notification (DBN) law, there is a significant 3.8% decrease in the long‐term effective tax rate. This reduction translates to annual tax savings of approximately $8.13 million. Furthermore, tax sheltering is found to decrease by 19.17% compared to the sample average. These effects are particularly pronounced in financially constrained firms and those operating in high‐tech industries. The findings suggest that after the introduction of mandatory data breach disclosure requirements, firms are less inclined to engage in aggressive tax avoidance practices, which could otherwise lead to increased litigation costs. Instead, they prioritize efficient tax planning strategies to improve after‐tax cash flows.

Effect of Selected Board Attributes on Tax Aggressiveness of Quoted Insurance Companies in Nigeria

The main objective of this study is to examine the effect of selected board attributes on tax aggressiveness of quoted insurance companies in Nigeria. Specifically, the study examines the combined effect of female directors and board financial expertise on tax aggressiveness of quoted insurance companies in Nigeria. Tax aggressiveness was measured using effective tax rate while female directors and financial expertise were measured using proportion of female directors on the board to the total number of independent directors and proportion of financial experts on the board to the total number of independent directors respectively. This study uses the longitudinal research design. The population of the study is the entire twenty-three listed companies in the Nigerian insurance sector. The sample size of twenty-two was selected after eliminating one without complete data. Data were sourced from the annual financial statements of the listed insurance companies for the period 2011-2022. To be able to examine the effect of female directors and financial expertise on tax aggressiveness, the study used panel multiple regression model for the analysis. The result of the study shows that female directors have negative and insignificant effect on tax aggressiveness. However, the study finds statistical evidence which suggests that boards financial expertise has significant effect on tax aggressiveness in the insurance sector. From the findings, it was concluded that board attributes have strong explanatory power on tax aggressiveness. The study recommends that since management could aspire to avoid more taxes, because they estimate the tax benefits too high, more external board members with accounting and corporate reporting knowledge should be admitted on the boards to curtail managerial aggressive tax planning.

Does the presence of a sustainability committee strengthen the impact of ESG disclosure on tax aggressiveness? Insights from North America

AbstractWe investigate the influence of ESG disclosure on tax aggressiveness within the North American Travel and Leisure (T&L) sectors, specifically examining the role of sustainability committees in this relationship. Our analysis utilizes longitudinal panel data from the USA B3000 and Canadian S&P/TSX indices over the period from 2010 to 2020. Employing fixed-effects panel quantile regression with two distinct measures of tax aggressiveness, our findings indicate that firms with a focus on ESG tend to display higher levels of tax aggressiveness. This suggests that some companies might use strong ESG performance as a facade to obscure aggressive tax strategies. Moreover, our research introduces new evidence that the existence of sustainability committees can both hinder corporate tax aggressiveness and foster an ethical corporate culture, which aligns higher ESG engagement with lower tax aggressiveness. Our study underscores the importance of fostering tax compliance in T&L companies, emphasizing that individuals and corporations, which often seek direct state benefits, regard robust public services as essential for encouraging adherence to tax regulations. Furthermore, sustainability committees play a crucial role in enabling firms to address broader social issues, including tackling tax aggressiveness, thus shaping their sustainability agendas.

Corporate Tax Aggressiveness and Managerial Capabilities: Insights From Indonesian Firms

This study aims to investigate the effect of management ability, business strategy, and profitability on corporate tax aggressiveness. This study uses mediation analysis with the Smart PLS approach on a sample of basic materials sector companies listed on the IDX from 2020 to 2022. The results show that more capable management tends to adopt a conservative approach in tax management practices. In addition, business strategies such as prospector and defender have a significant impact on tax aggressiveness. More profitable companies tend to implement more aggressive tax strategies. Companies need to improve managerial capabilities to manage taxes more effectively, as well as formulate appropriate business strategies to mitigate tax risks in the future. With a better understanding of tax risks, companies can minimize potential tax disputes and protect their reputation and long-term performance. This study extends the research time scope to 2022 and uses corporate governance mechanisms as moderating variables, both internal and external, which have not been widely studied in previous studies.

Taxes under stress: bank stress tests and corporate tax planning

PurposeThis paper aims to examine how bank stress tests affect bank tax planning.Design/methodology/approachThe study uses US bank stress test bank size thresholds and a regression discontinuity design to investigate the effect of the Dodd-Frank Act and the instituted bank stress tests on bank tax planning. We use different measures of tax planning, including bank-specific measures and measures of tax avoidance, tax aggressiveness, and effective tax planning from recent literature. Our regression discontinuity and difference-in-differences regression analyses include bank and year fixed-effects and lagged bank characteristics to control for potential endogeneity.FindingsThis study finds that stress tests have the unintended consequences of intensifying tax planning and increasing tax avoidance. Stress-test banks increase tax avoidance by accelerating charge-offs, net interest, and non-interest expenses. However, this increase in tax planning is not optimally maximized, leading to lower effective tax planning compared to non-stress-test banks. Banks with a substantial increase in tax avoidance under the Dodd–Frank Act tend to increase their risk, investing in high-risk-weight assets and lending in riskier loan categories. These findings are consistent with tax minimization conditions under added regulatory attention and policy uncertainty.Originality/valueLiterature on bank tax planning is limited. Most tax avoidance literature excludes financial institutions such as bank holding companies mainly due to differences in business practices and regulatory frameworks. This study is the first to investigate tax planning behavior among US banks. The current study thus extends the research field by examining the effect of bank transparency regulations, such as bank stress tests, on bank tax planning activities. Our findings have a direct bank policy implication. They show that stress testing has the unintended consequences of increasing tax planning activities and consequently increasing risk-taking on banks with high tax avoidance, which goes against the goals of stress testing regulations.

The Influence of Corporate Governance on Tax Avoidance and The Role of Independent Auditors in Vietnamese Firms

This research addresses how corporate governance mechanisms influence tax avoidance in Vietnamese firms and the role of independent auditors in detecting or mitigating tax avoidance. The purpose of the research is to explore the relationship between corporate governance structures (e.g., independent boards, audit committees) and tax behavior, as well as to assess how auditors interact with these governance mechanisms to ensure tax compliance. A qualitative case study approach was used to analyze six companies from different sectors and governance models (2 state-owned enterprises; 2 family-owned private companies; and 2 publicly listed companies) through 18 interviews conducted between May 2024 and October 2024 with 3 key individuals from each company, including: Independent auditor; Company CEO; Manager or administrator, along with documentary analysis of financial statements and tax filings. The research found that firms with stronger governance (e.g., independent boards and active audit committees) are less likely to engage in tax avoidance, while weak governance structures often lead to more aggressive tax strategies. Independent auditors were more effective in well-governed firms, but faced ethical challenges in weaker ones. These findings are significant because they highlight the importance of strengthening governance frameworks and ensuring auditor independence to reduce tax avoidance and improve corporate transparency in Vietnam.

Intra-Group Financing: Analysis of the Coexistence of the Arm’s Length Principle with the General Anti-Abuse Rules

The deduction of interest expenses for corporate tax purposes has attracted the attention of tax policymakers and multinational enterprises owing to concerns about base erosion and profit shifting. Prior to the transposition by Member States of the Anti-Tax Avoidance Directive that established a minimum standard, national rules to limit the tax deduction of interest expenses and anti-abuse rules to tackle perceived aggressive tax planning lacked uniformity and consistency at EU level. This resulted in legal disputes, especially in cross-border intra-group financing cases when transfer pricing based on the arm’s length principle is also applied. The Court of Justice of the European Union has set general guidelines and an interpretative framework. However, the opinion of the Advocate General in the X BV case (C-585/22), suggesting a departure from the Lexel case (C-484/19), raises significant concerns. In the authors’ opinion, this approach could lead to an overreaching application of the GAAR even to arrangements subject to the arm’s length principle that, based on economic rationality and substance, is intended to treat in the same way cross-border intra-group and third-party structures and transactions.

The impact of asset specificity on corporate tax avoidance: Do financial constraints and product market power matter?

Our findings reveal that asset specificity significantly enhances corporate tax avoidance, with firms exhibiting lower cash effective tax rates. Firms with higher asset specificity also engage in more aggressive tax avoidance strategies, including tax dodging and long-term tax planning. Additionally, our analysis indicates that the positive impact of asset specificity on tax avoidance is less pronounced in firms with lower ESG performance but is more pronounced in those facing negative demand shocks or operating during periods of economic policy uncertainty. We also find that financial constraints and product market power mediate the relationship between asset specificity and tax avoidance, with financial constraints serving as the dominant economic channel. These findings offer new insights into the factors driving corporate tax avoidance and highlight the complex interplay between asset specificity, financial constraints, product market power, and tax planning strategies.

Does Firm Size Buffer Tax Aggressiveness? Examining Financial Distress and Capital Intensity

This study investigates the relationships between financial distress, capital intensity, and tax aggressiveness, focusing on the moderating role of firm size. Utilizing a sample of property and real estate companies listed on the Indonesia Stock Exchange from 2021 to 2023, the research employs quantitative methods to analyze the influence of financial distress and capital intensity on tax aggressiveness. The findings reveal that financial distress significantly increases tax aggressiveness, indicating that firms facing economic challenges are more likely to pursue aggressive tax strategies to enhance their cash flow. Additionally, capital intensity is positively associated with tax aggressiveness, as firms leverage their capital assets for potential tax benefits. However, the study finds that firm size does not significantly moderate the relationships between financial distress or capital intensity and tax aggressiveness, suggesting that the effects of these variables are consistent across different firm sizes. These results underscore the complex dynamics of corporate tax behavior and highlight the need for firms to carefully consider their tax strategies in the context of financial conditions and capital structure. The research contributes to a deeper understanding of tax aggressiveness in emerging markets and provides implications for corporate managers and policymakers regarding tax planning and regulation

DETERMINANTS OF TAX AGGRESSIVENESS WITH CORPORATE GOVERNANCE AS A MODERATION VARIABLE IN PUBLIC COMPANIES IN INDONESIA

This research examines how corporate governance moderates the impact of financial derivatives, executive pay, executive traits, and family ownership on tax aggressiveness in manufacturing firms listed on the Indonesia Stock Exchange between 2021 and 2023. Independent commissioners are used as a proxy for corporate governance. A total of 86 companies were included in the study using purposive sampling. The data analysis method employed was moderated regression analysis (MRA). The findings indicated that tax aggressiveness was impacted by financial derivatives, executive compensation, and executive behaviour but not by family ownership. These findings suggest that the level of family ownership does not dictate the degree of tax avoidance. Corporate governance as a moderating factor can influence executive compensation and executive behaviour but does not influence financial derivatives and family ownership concerning tax aggressiveness.

Tax Aggressiveness and Earnings Management: Evidence from Listed Commercial Banks in Nigeria

This study examined the extents to which tax aggressiveness affects earnings management of listed commercial banks in Nigeria. Ex-post facto research design and panel data was obtained for twelve (12) listed commercial banks from 2014-2023. Tax aggressiveness was measured using cash effective rate while two earnings management models were employed namely, Chang and Jones models. Data collected were analyzed through descriptive, post-estimation and inferential statistical techniques. The fixed and random effects regression models showed that tax aggressiveness significantly affects earnings management models. In view of the findings, it recommends the needs for management of listed commercial banks to dampen earnings management practices since it is negatively influenced by the level of tax aggressiveness. Furthermore, management of publicly listed commercial banks needs to engage in aggressive tax planning to enhance their performance; however such level of tax aggressive planning should be kept minimal as possible to further discourage tax fraud and evasion.

THE INFLUENCE OF DEFERRED TAX EXPENSE, CAPITAL INTENSITY, LEVERAGE, AND CORPORATE SOCIAL RESPONSIBILITY ON TAX AGGRESSIVENESS

The objective of this research is to determine how tax aggressiveness is affected by factors like as leverage, deferred tax cost, capital intensity, and corporate social responsibility (CSR). The sample group for this study consists of manufacturing businesses that will be trading on the Indonesia Stock Exchange (IDX) between 2019 and 2021. The 78 firms that made up the sample were researched over a period of three years using secondary data derived from financial and annual reports as well as purposeful sampling approaches. Multiple linear regression is the method used for analysis. According to the findings, tax aggressiveness is negatively affected by capital intensity and CSR. Leverage has a positive effect on tax aggressiveness. Then, deferred tax expense has no effect on tax aggressiveness.

CORPORATE TAX AGGRESSIVENESS RESEARCH LANDSCAPE: BIBLIOMETRIC MAPPING

The self-assessment mechanism in Indonesia allows companies to independently calculate and report their tax liabilities, potentially encouraging aggressive tax practices. This study aims to identify research trends, main themes, and key factors in Corporate Tax Aggressiveness from 2014 to 2024. The method involved searching for research articles with the keyword "Tax Aggressiveness" in international journals indexed by Scopus, national journals indexed by Sinta through the Garuda website, and national journals using Publish or Perish, resulting in 400 articles. These articles were analyzed using the VOSviewer application. This research utilizes bibliometric analysis to map Corporate Tax Aggressiveness trends over the past decade. The results show a significant annual increase in publications, with VOSviewer identifying 5 clusters and 56 items related to Corporate Tax Aggressiveness research. The study concludes that academic interest in Corporate Tax Aggressiveness is growing, highlighting the importance of this topic in tax literature. The recommendation is to use the identified factors in future research on tax aggressiveness.

Tax Aggressiveness: A Review of the Interaction of Independent Commissioners and Firm Size in the Context of Indonesia Sustainable Development Goals

Objective: The study conducted empirical testing of the independent commissioners can decrease tax aggressiveness. Independent commissioners are part of corporate governance. In addition, there are differences in the influence of the independent commissioners on tax aggressiveness between large and small companies. Theoretical Framework: The study uses agency theory. Agency theory assumes that each individual has their own interests that motivate them, resulting in a conflict of interest between taxpayers and tax collectors. The difference in research results on the effect of the independent commissioners on tax aggressiveness raises contextual variables. The contextual variable used is firm size. Methods: The study used manufacturing companies listed on the Indonesia Stock Exchange from 2020 to 2022. The sample selection used is based on research criteria. The test used is moderation regression analysis. Results: The study is to support the hypothesis stating that there is an interaction effect between the independent commissioners and firm size on tax aggressiveness. The larger the firm size, the weaker the negative influence of the independent commissioners on tax aggressiveness. Contribution: This research is expected to contribute to the government to increase revenue from income tax. The government can review the rules regarding the independent commissioners in overseeing management, especially in large companies. Large companies are more likely to carry out tax aggressiveness in the hope of achieving sustainable development goals. Originality/Value: The novelty of this research is that it raises firm size as a moderator of the relationship between the independent commissioners and tax aggressiveness.

Pentingnya Struktur Modal Untuk Meningkatkan Kinerja Keuangan Perusahaan Sub-Sektor Teknologi

This research aims to determine the impact of investment decision, structure capital, and tax aggressiveness on financial performance.. This type of research is quantitative research that uses secondary data in 2018-2022 periods. The sample used was 44 technology subsector companies listed on the Indonesia Stock Exchange (BEI). This research uses purposive sampling method with certain criteria. There were 63 data obtained which were used in this research. The hypotheses in this research were analysis uses multiple linear regression. The results of this research show that 1) investment decisions have no significant effect on the company's financial performance, 2) capital structure has a positive significant effect on the company's financial performance, 3) tax aggressiveness have no significant effect on the company's financial performance

The role of capital intensity in mediating CEO risk-taking, sustainability reporting, aggressive tax strategies, and financial reporting

This study explores the influence of CEO risk-taking, sustainability reporting, and aggressive tax practices on financial reporting quality, focusing on the mediating role of capital intensity. Data from 2,305 companies listed in Indonesia over five years were analyzed using path analysis, with the Baron and Kenny approach employed to identify significant mediation effects. The findings reveal that CEO risk-taking, sustainability reporting, and aggressive tax practices indirectly impact financial reporting quality through capital intensity. The study also underscores the role of materiality gaps in sustainability reporting and tax non-compliance in shaping financial reporting outcomes. Capital intensity emerges as a crucial mediator, linking these factors to financial reporting quality. The results suggest that these indirect effects are significant and should be considered in corporate governance and financial management. To improve financial reporting quality, companies must recognize the role of capital intensity, while regulators and policymakers should address sustainability reporting standards and the discrepancies between accounting and tax regulations.

The Effect of Political Connections, Independent Commissioners and Capital Intensity on Tax Aggressiveness with Transfer Pricing as a Moderating Variable (Empirical Study of Mining Companies Listed on the IDX for the 2018-2022 Period)

This study aims to examine the effect of political connections, independent commissioners, and capital intensity on tax aggressiveness with transfer pricing as a moderating variable. The population in this study is all mining companies listed on the Indonesia Stock Exchange (IDX) in the 2018-2022 period. The purposive sampling method is a sample selection technique used in this study with various specific criteria. The data analysis technique used is the classical assumption test consisting of the normality test, multicollinearity test, heteroscedasticity test and autocorrelation test. Meanwhile, hypothesis testing is carried out using multiple linear regression analysis, f test, coefficient of determination (R2) test and t test. The results of the data analysis show that political connections have a significant effect on tax aggressiveness with a significant value of 0.029 (p <0.05). Likewise, independent commissioners also have a significant effect on tax aggressiveness with a significant value of 0.034 (p <0.05). On the other hand, capital intensity does not have a significant effect on tax aggressiveness with a significant value of 0.333 (p > 0.05). Furthermore, political connections have a significant effect on tax aggressiveness with transfer pricing as a moderating variable, with a significant value of 0.027 (p < 0.05). Independent commissioners also show a significant effect on tax aggressiveness with transfer pricing as a moderating variable, with a significant value of 0.004 (p < 0.05). However, capital intensity does not have a significant impact on tax aggressiveness when moderated by transfer pricing, with a significant value of 0.480 (p > 0.05).

The Effect of Green Accounting, Tax Aggressiveness, and Company Size on Firm Value

This study aims to provide empirical evidence regarding the influence of green accounting, tax aggressiveness, and firm size on firm value in the Investor33 companies listed on the Indonesia Stock Exchange during the period 2019-2022. This research employs descriptive statistical analysis and panel data regression analysis using Eviews 11. Data for the study are sourced from the Investor33 Index companies from 2019 to 2020, obtained from www.investing.com and the official websites of the companies, resulting in 132 samples. The analysis utilizes linear regression analysis based on the selection between fixed effect model, random effect model, and common effect model, with reference to the results of the Chow test and the Hausman test. The findings reveal a positive and significant influence of green accounting on firm value among companies in the Investor33 Index. Conversely, no significant influence is found between tax aggressiveness and firm value, as well as between firm size and firm value in this study.

Tax control and corporate VAT compliance: An empirical assessment of the moderating role of tax strategy

Tax control frameworks (TCF) of higher quality are seen by tax authorities and the OECD as a prerequisite for corporate tax compliance. However, a higher quality TCF can also enable organizations to reduce their tax burden by providing information that allows them to make the best use of opportunities within the boundaries of the tax law. We investigate the effect of TCF quality on tax compliance by looking at the tax strategy of the organization and whether the organization unintentionally or intentionally fails to comply. We focus on Value Added Tax (VAT) and test our hypotheses using a sample of large organizations, using a combination of survey data and tax audit results from the Netherlands. Our results show that a TCF of higher quality is positively associated with VAT compliance, resulting in both less unintentional and less intentional errors requiring tax adjustment. For organizations with a more conservative tax strategy, we find that the quality of the TCF does not affect the level of intentional non-compliance. For organizations with a more aggressive tax strategy, however, the level of intentional non-compliance is conditional upon the quality of the TCF, with a lower (higher) quality TCF leading to more (less) intentional non-compliance.

Exploring aggressive tax planning dynamics: the impact of investment opportunity sets and free cash-flow surplus

PurposeThis study aims to investigate how investment opportunity sets (IOs) and free cash-flow (FCF) surpluses affect aggressive tax planning (ATP). This research focuses on examining the correlation between these factors and delves into how ATP, perceived as a tool for exploiting legal loopholes, plays a central role.Design/methodology/approachThis study uses panel data analysis techniques on a sample of 1,248 firm-observations gathered from nonfinancial enterprises in Jordan that are listed in the Amman Stock Exchange (ASE) between the years 2008 and 2019. The Driscoll–Kraay regression model (fixed effect) is enlisted to avoid the inconsistency of the slope across individual units and time period.FindingsThe findings indicate that the IOs does not affect ATP. However, there is a significant negative effect of FCF surplus on ATP. Furthermore, consistent with positive accounting theory the data reveal that all of these control variables exert a substantial positive influence on ATP.Research limitations/implicationsThis study concentrates on nonfinancial firms listed in the ASE, thereby constraining the applicability of the results to alternative contexts. Nevertheless, the findings of this study enhance comprehension regarding the extent of ATP and bear policy implications for policymakers regarding the structuring of future tax systems aimed at reducing the prevalence of tax avoidance behaviors. Thus, future research should conduct longitudinal studies to capture temporal dynamics.Originality/valueThis study contributes to the existing literature on ATP by focusing on using the Wilson tax-shelter model as a precise proxy. It fills gaps in prior research by exploring connections between IOs, FCF and ATP. The findings offer novel insights into the dynamics of tax planning strategies and contribute to the broader understanding of tax management practices.