Tax Liability Research Articles

Liability of Former Members of the Management Board ofCapital Companies for Public Law Obligations

The article concerns the complex and multifaceted issue of financial liability of former members of the managementboards of capital companies for the company’s obligations, especially in the context of tax liabilities. Thereis a complexity resulting from intertwined legal regulations contained in the Commercial Companies Code andthe Tax Ordinance. Key issues discussed in the text include: the compensatory nature of liability, differencesbetween the treatment of civil and tax liabilities, and specific legal situations arising from both mistakes and intentionalactions of the management board in the context of obligations. Particular attention was paid to the judgmentof the Constitutional Tribunal, which considered the liability of a former board member and the possibilityof defending against creditors’ claims while simultaneously lacking access to documentation and legal tools afterleaving the position. The final question concerns the impact of this verdict on public law regulations and its applicationin the context of tax law.

Optimizing VAT Planning to Enhance Tax Efficiency in Indonesia

This study investigates the impact of tax planning strategies on VAT reporting and payment efficiency for PT. Fajar Putra Plasindo. Using a quantitative approach, it analyzes VAT data from 2021 to assess the effectiveness of tax planning in optimizing the company's tax burden. Results show a tax burden efficiency of Rp. 38,783,510, highlighting the benefits of strategies such as purchasing taxable goods/services from registered taxpayers and delaying tax invoice reporting. These findings emphasize the importance of proactive tax planning for minimizing tax liabilities and improving cash flow management, ultimately enhancing financial performance and regulatory compliance for companies operating in similar contexts. Highlight: Tax planning optimizes VAT burden with strategic purchasing and reporting. Improved financial performance through effective tax planning strategies. Enhances regulatory compliance, minimizing risks and penalties for businesses. Keywoard: Tax Planning, VAT Reporting, Efficiency, Financial Performance, Regulatory Compliance

Mental accounting in tax liabilities

Mental accounting refers to a set of cognitive processes in which people code, categorize and evaluate money depending on where it came from and what they are going to spend it on, and this influences the way they make decisions. The concept of mental accounting violates the principles of standard economic theories, which consider money to be fungible or interchangeable. When people mentally account, they prefer to keep accounts separate and not to move money from one mental account to another. The current study aimed to investigate how people mentally account by designing a tax compliance laboratory experiment and using a variety of scenarios. In the first scenario, which involved different tax rate variations, participants were asked to pay tax on their earned and capital incomes. The results showed that participants formed separate mental accounts and treated their earned and capital incomes differently. Specifically, when faced with high tax rates of 60%, tax evasion was significantly higher for earned (labour) incomes compared to capital incomes. This willingness to cheat in order to protect labour income, suggests that individuals value their earned income more compared to income received from a given endowment (capital income). Interestingly, in subsequent scenarios involving different audit probabilities and fine rates, no mental accounting effects were found. In conclusion, this study provides initial experimental insights into the effects of mental accounting on taxpayer’s compliance, but further research is needed to explain nuanced findings and investigate tax decisions for different reference points and other sources of income.

Tax Implications of Real Estate Investments: A Comprehensive Analysis

Real estate investments constitute a significant portion of many investors' portfolios, offering the potential for long-term wealth accumulation and diversification. However, beyond considerations of property location, market trends, and financing options, investors must also navigate the intricate landscape of tax implications associated with real estate investments. Taxes play a critical role in shaping investment decisions, impacting cash flow, profitability, and overall returns. Therefore, understanding and effectively managing tax obligations is paramount for maximizing investment success in the real estate market. This comprehensive analysis aims to delve into the multifaceted realm of tax implications related to real estate investments. By examining various tax strategies, structures, regulations, and their implications, this study seeks to provide investors with valuable insights and tools to optimize their tax position and enhance investment outcomes. From the tax treatment of rental income and capital gains to the utilization of tax-efficient investment structures like REITs and LLCs, every aspect of real estate taxation will be explored in detail. Moreover, with the ever-evolving nature of tax legislation and economic conditions, it is imperative for investors to stay abreast of changes that may impact their tax liabilities and investment strategies. Through a thorough analysis of historical trends and current tax laws, this study aims to equip investors with the knowledge and foresight necessary to adapt and thrive in a dynamic tax environment. In essence, this comprehensive analysis endeavors to empower real estate investors with the tools and understanding needed to navigate the complex terrain of tax implications effectively. By unraveling the intricacies of real estate taxation and providing actionable insights, this study aspires to assist investors in making informed decisions, optimizing their tax position, and ultimately realizing the full potential of their real estate investments.

TAX RESIDENCE ISSUES FOR UKRAINIAN EMPLOYEES WORKING ABROAD

The tax resident status creates unlimited tax liabilities for individual in Ukraine. Today the war in Ukraine changes the employment of Ukrainians dramatically. Many Ukrainian enterprises have been forced to relocate business to other regions or states and have changed how their business is conducted (e.g. Ukrainian airlines relocated aircrafts and crew to other countries). This temporary dislocation of people can have tax consequences for those individuals and the businesses for which they work. In the article criterions of tax residency are researched and defined loopholes that may lead to tax residence avoidance or, contrary, may create a risk of dual residence conflict for the Ukrainian nationals, especially during the war time. It is proposed to widen the criterions of tax residency during the martial law in Ukraine for the proper definition of the tax residence of Ukrainians who stay abroad more than 183 days during the calendar year, but hold the center of vital interests in Ukraine.

Penya on the borderline of private and public regulation: the tax aspect of external economic activity

The application of sanctions is a certain summary of the perception that a person has committed an offense. But before the direct application of sanctions, it is necessary to form a vision regarding the type of responsibility. That is, the construction of financial responsibility can be used, but as a certain generic model that unites institutional or sub-sectoral varieties of responsibility. At the same time, characterizing the tax liability consistently in the assessment of its nature and consequences, distinguish not one of the stages of the tax liability (payment of taxes and fees), but the whole construction of the tax liability (accounting-payment-reporting). A systematic view of the construction of tax liability involves both an assessment of the behavior of obligated persons (payers of taxes and fees, etc.) and subjects of authority. The complexity of social relations, which express the peculiarities of foreign economic activity, determines the clear demarcation of these relations into certain sectors, the basis of whose regulation are precisely the branch characteristics of the subject and the method of the corresponding grouping of legal norms. It is necessary to distinguish between sanctions that are applied as a result of financial responsibility and sanctions that have a monetary nature but are regulated by other branches. Fines and interest are tools that are used in both private and public law. This involves, depending on the purpose, the subject of regulation and the application of not just public-law or private-law methods, but the tools of the relevant industry or sub-industry (economic law, customs law, money circulation, tax law). In this sense, we would like to distinguish between the occurrence of adverse consequences for payers and the application of sanctions to them. The use of a penalty refers to the regimes of adverse consequences. But, it is unlikely that there is a reason to equate penalties and sanctions (fines). The basis for applying a sanction (fine) is illegal behavior, commission of an offense. The basis for the application of a penalty is the untimely or incomplete fulfillment of the tax obligation. The determination of the penalty in the analysis of such issues must be connected with the relevant powers of the supervisory body. That is, forming the competence of the subject of power, the controlling body, the state delegates to it not only the right to implement certain measures, but also the imperative duty to implement such a right.

Problems of legal regulation of thin capitalization in Ukraine

The proliferation of multinational companies is lengthening global value chains, and the development of the digital economy is giving them even more opportunities to shift profits. Intra-group loans are often used to shift profits to a jurisdiction with low tax rates to minimize overall tax liability. In order to combat the illegal transfer of profits, most countries introduce thin capitalization rules. Ukraine joined the BEPS plan, action 4 of which summarized the best practices for regulating debt obligations to non-residents. Most countries limit the total amount of loans, interest payments on which are deducted from the corporate tax base. The Tax Code of Ukraine establishes a double tax barrier - it limits both the amount of debt and the share of profit before deduction. However, the established barriers not only do not prevent profit shifting, but encourage the widespread use of this method to reduce tax liabilities due to profit shifting. The main drawback of thin capitalization rules is that allowed excessive amounts of loans from non-residents do not oblige the borrower to improve the financial results of the enterprise. Instead, they provide an opportunity to reduce the corporate tax base by 30% indefinitely and move them to jurisdictions with low tax rates. The method of regulation provided for by the Tax Code of Ukraine can be considered as an incentive for the misuse of State budget funds. In order to eliminate these shortcomings, it is proposed to significantly reduce both barriers and to oblige the borrower to ensure the effective use of loans to stimulate the socio-economic development of the country, i.e. to deduct interest from taxable profit only if there is an actual increase in the produced added value, the introduction of new products and/or processes. Existing shortcomings in the legal regulation of debt obligations prevent legal resolution of the case in court. New criteria for identification of the resident with regard to individuals and legal entities and the beneficial owner of income have been proposed.

Aggressive Tax Planning and Performance by Kenya Revenue Authority

Taxation is a vital fiscal tool that can be utilized to augment the economic wellbeing of a nation. Taxation is not only vital for revenue generation purposes; it can also be used to control the behavior of taxpayers such as raising taxes on commodities that are deemed to be toxic to the society, if over consumed. In Kenya, from Financial Year 2010/11 to Financial Year 2020/21 has recorded a deficit budget. A deficit budget implies that the economy’s leverage is weak. The country`s debt ceiling has now become a major issue, since the increase in national debt has surpassed the stipulated threshold necessitating adjustment of debt ceiling. Aggressive tax planning is vital with regards to revenue performance by Kenya Revenue Authority. This paper reviews the conceptual, theoretical and empirical literature and raises a variety of issues that necessitates a proposed theoretical model for the purpose of understanding aggressive tax planning and performance by Kenya Revenue Authority. This study aims at assessing the effects of debt shifting, location of intellectual property rights, bilateral tax treaty and performance by Kenya Revenue Authority. This research will be anchored on Social Learning Theory and Tax Competition Theory. This research study reviewed on the previous studies undertaken on the area of interest. This study focused on the study findings and the methodology. The conclusions regarding the relationship that exist between the independent variables and dependent for this study were derived from the findings of the past studies. Recommendations in this study were made based on the previous study findings and conclusions. This study found that Multinational corporations tend to exploit all the available loopholes within the tax laws in order for them to decrease their tax liability to tax administration. Due to multinational corporations adopting aggressive tax planning, the dire repercussions include tax revenues being collected by the tax administration tend to reduce significantly. This leads to tax administration not meeting their tax revenues collection targets. This study recommends KRA to continuously review any existing loopholes in the tax laws. Sealing the respective loopholes in the tax laws tend to enhance tax revenues collection targets. Further, multinational corporations need to observe ethics in their business practices.

Dynamics of legal regulation of exemptions in the payment and calculation of land fees in the conditions of martial law on the basis of judicial practice

The relevance of the research topic is stipulated by the new challenges faced by our country in connection with the armed aggression of the Russian Federation against Ukraine and the need to adapt the legal regulation of land payment in terms of its calculation and payment during the period of martial law. The purpose of the article is to trace the dynamics of legal regulation of land payment during martial law, and to review the current case law of both national courts regarding the resolution of disputes on the cancellation of a tax assessment notice and the case law of the European Court of Human Rights in terms of determining the conceptual foundations for the construction of legal provisions. The study of the issue of payment and accrual of land payment is of both applied and theoretical nature, since violation of the means and rules of rule-making technique leads to tax disputes. The analysis of legal constructions of the Tax Code of Ukraine and other regulatory legal acts made it possible to identify problems in the regulation of land payment, which consist in violation of the rule of law principle provided for by the Constitution of Ukraine. The Constitutional Court of Ukraine has defined the principles of legal certainty and legal predictability as components of the rule of law. The inconsistency of the provisions of the Tax Code of Ukraine and bylaws has led to a dual interpretation of their rights and obligations by taxpayers and controlling authorities. The author analyzes the positions of the controlling authorities in terms of amendments to the regulation of the calculation and payment of tax liabilities for taxation of land plots located in the temporarily occupied territories or in the territories where military operations are (were) conducted.

Tax Administration and Financial Performance of Manufacturing Firms in Kenya: A literature Review

This study explores the impact of tax administration practices on the financial performance of manufacturing firms in Kenya. The manufacturing sector is crucial for economic growth and job creation, making it essential to understand how tax policies affect its performance. Tax administration encompasses procedures and policies governing tax compliance, which have evolved over time. Effective tax administration is vital for economic stability and funding public services. However, inefficient practices can hinder firm productivity and growth. Drawing on tax planning theory and agency theory, this study examines how firms strategically manage tax liabilities and navigate principal-agent relationships to optimize financial performance. The empirical review highlights findings from previous studies on the relationship between tax administration practices and firm performance in Kenya. These studies underscore the importance of tax incentives, compliance costs, and governance mechanisms in shaping firm behavior and economic outcomes. By understanding the nuances of tax administration practices, policymakers and firms can implement strategies to enhance economic stability and growth in the manufacturing sector.

Withholding Tax Obligations and Liabilities Imposed on Digital Platforms to Ensure the Effective Taxation of Their Sellers

The authors analyse, from a direct taxation perspective, the legal and operational aspects of the liabilities imposed on digital platforms to secure the collection of their sellers’ taxes. In particular, they focus on regimes that designate digital platforms as withholding agents or third parties jointly and severally liable for the payment of their sellers’ taxes. By looking at the regimes currently in force in four different countries (i.e. Belgium, Italy, Mexico and Uruguay) and using them as case studies, the authors make an in-depth comparative analysis of the withholding tax obligations imposed on digital platforms. Section 2.1. describes different approaches for establishing third-party liability for the payment of taxes in order to place those foreseen for digital platforms into this broader framework. Sections 3. and 4. provide a brief overview of tax regimes in the surveyed jurisdictions and a comparative analysis also in light of a comprehensive literature review. Section 5. addresses the imposition of withholding tax obligations on digital platforms and the aforementioned national regimes from a tax policy, fundamental rights and general legal/tax principles perspective. Section 6. provides a conclusion.

On the issue of determining the actual tax liabilities in transactions with "high tech" companies

The article is devoted to the issues of improving the methodology for determining valid tax liabilities (BOTTOM) in transactions with "high tech" companies. It is noted that due to the increase in the number of "high tech" companies, the question arises not only of the control of their chain of exchange of goods/works/services, but also of determining the rules for calculating the taxes. In this regard, the aim of the article is to develop a methodology for determining the tax liabilities when identifying transactions carried out with "high tech" companies based on an analysis of existing judicial practice. The object of scientific work is a set of socio-economic relations that arise in the process of determining the BOTTOM. The subject of the study is the methodology for determining the actual tax liabilities (BOTTOM) in transactions with "high tech" companies. The research methodology is based on the use of tools and methods for the analysis and synthesis of judicial practice, tabular and graphical methods of data visualization. The scientific novelty of this study lies in the adaptation of the general conceptual methodology for determining the actual tax obligations of Tikhonova A.V. in relation to such a type of tax schemes as a transaction with high tech companies. In the end of the article, transactions with "high tech" companies were classified, the basic method of calculating the BOTTOM for each of the types of transactions considered was determined, the main risk markers of tax evasion schemes in transactions with "high tech" companies were identified, and measures of the tax authority to prove the fact of participation of a "high tech" organization in the transaction were formulated. Thus, the article has meaningful practical significance and will be useful to a wide range of specialists from both tax authorities and consulting organizations.

Corporate Taxes, Dividend Policy and Firm Performance in Nigeria Quoted `Firms

Purpose: This study examined corporate taxes, transaction cost, and dividend policy in Nigeria quoted firms. The main purpose of this research is to ascertain the relationship between taxes, transaction cost, and the dividend policy of quoted firms in Nigeria. Materials and Methods: The research adopted both statistical and econometric techniques to analyze data obtained from the Nigeria Stock Exchange between 2018 to 2022. The research work employed an ex-post facto research design to obtain, analyze, and interpret the relevant data for hypotheses testing. Simple random sampling and proportionate stratified random sampling was used to select 36 firms quoted in the Nigerian Stock Exchange to ensure all sectors are represented in the sample size. The data was analyzed and presented using E-views 12 statistical software. Using the OLS panel model, the fixed effect OLS model was considered the most appropriate for the empirical modeling and analysis of the equations. Findings: Our findings in this study indicated that dividend payout ratio (DPR) has a negative and insignificant relationship with current income taxes (CIT), deferred taxes (DTL). Company size (SIZE) has positive but not significant relationship with dividend payout while assets growth (GHT) and leverage ratio (LEV) have positive and insignificant relationship with dividend payout (DPR). Also, dividend per share (DPS) has a positive relationship with company income taxes (CIT) but negative relationship with deferred tax liabilities (DTL). Implications to Theory, Practice and Policy: The study was informed by the “Dividend Policy Theory” The debate on whether corporate taxes has impact on dividend payments of companies is unending. The result of the study is consistent with the findings of scholars and researchers with similar interest such as Jensen and Johnson (1995); Miller and Scholes (1982). It is, therefore, recommended that companies should concentrate on other determinants of dividend policy and not corporate taxes and transaction cost, since corporate taxes and transaction cost have no significant effect on dividend policy. Management should design a dividend payout policy that maximizes market value of quoted firms.

Aggressive tax planning as a threat to national security

The article examines the strategies of aggressive tax planning as a threat to state security. Aggressive tax planning practices are becoming more common. This poses multifaceted challenges to fiscal policy, economic stability, and national security. By conducting a comprehensive analysis of applied strategies, economic impacts, and potential policy measures, this study aims to provide information on the complex mechanism of tax evasion. The article discusses various strategies that companies use in aggressive tax planning. These strategies cover offshore tax havens, transfer pricing manipulation, royalty movement, "fine capitalization" and tax deferral, each of which uses legal nuances to minimize tax liabilities. The study examines the economic consequences of aggressive tax planning, focusing on significant revenue losses for governments around the world. Eroding tax revenues through aggressive tax planning reduces states ' ability to finance basic public services, contributing to budget deficits and economic instability. In addition, it creates material inequality, contributes to social unrest, and jeopardizes the nation's ability to solve national security problems. By analyzing these economic implications, this study highlights the urgency of considering aggressive tax planning as a fiscal and national security issue.

Do tax audits have a dynamic impact? Evidence from corporate income tax administrative data

Making use of a unique administrative data set consisting of the universe of administrative filings in Rwanda, this paper investigates the impact of tax audits on businesses’ reporting behaviour. The evidence suggests that tax audits have a positive impact on corporate income and corporate tax liabilities reported for three years after the start of the audit process. The results also suggest that the type of audit matters. While ‘comprehensive’ tax audits have a significant positive effect on compliance, ‘narrow-scope’ tax audits exhibit both a positive and a negative effect during a three-year period after the audit, with the net impact being negative. The implication of this, from a tax compliance perspective, is that ‘narrow-scope’ audits are ineffective and that doing more of those and less of comprehensive ones might have a negative impact on tax compliance. Effective tax compliance strategy therefore requires the careful evaluation of all types of audits.

Examining determinants of book-tax difference: Insights from Malaysian multinational corporations

This research investigates the factors affecting the book-tax differences of multinational corporations (MNCs) operating in Malaysia. The sample for this study consists of MNCs with subsidiaries in tax haven countries listed on the Financial Times Stock Exchange (FTSE) Bursa Malaysia Kuala Lumpur Composite Index (KLCI) and FTSE Bursa Malaysia Mid 70 Index. About 67 MNCs were selected after eliminating 32 companies with inadequate data and one with extreme outliers. A secondary data approach was employed, utilising multiple regression analysis. Selected corporate characteristics, including deferred tax liabilities and assets, taxable income, interest coverage ratio, return on assets, and effective tax rate, were used as independent variables. Descriptive analysis revealed evidence that corporations with a high return on assets (ROA) typically benefit from very high levels of book-tax differences (BTDs). Furthermore, the results indicate that a high interest coverage ratio may partly explain the outcomes leading to an increase in differences recorded between book income and taxable income. Thus, this supports the idea that a positive relationship exists between the interest coverage ratio and BTD. Hence, this study contributes to the tax literature and informs policymakers on factors influencing BTD, especially MNCs with subsidiaries in tax haven countries. The study aims to contribute to the existing body of knowledge by offering insights into the factors influencing MNCs' strategic tax planning decisions in the Malaysian context. Policymakers should address the unfair allocation of the worldwide tax base, where a reasonable portion of the earnings made by MNCs doing business in a nation should be subject to taxation in that nation.

A Curious Concession? Australia’s Withholding Tax Exemption for Franked Dividends

This article considers the tax treatment of dividends paid by Australian companies to non-resident shareholders, which benefit from a withholding tax exemption to the extent that the dividend is “franked” under Australia’s imputation system. The article considers the appropriateness of maintaining the withholding tax exemption now that more than 35 years have passed since the imputation system was introduced in Australia in 1987. It examines the original rationale for introducing the exemption and questions whether that rationale remains valid in 2023, given changes to corporate and individual tax rates in the intervening periods. The article also notes that to a potentially significant extent, the ongoing availability of this concession benefits foreign revenue authorities where non-resident shareholders live in countries which maintain a “classical” approach to taxation of dividends and allow credits for foreign withholding tax to be offset against tax liabilities in the country of residence. The article concludes that a comprehensive policy-based review of the concession is long overdue, that removal or modification of the exemption should be considered, and that the potential additional Australian tax revenue resulting from changes to the concession could be significant.

Apakah Dewan Komisaris Independen Mempunyai Peran Sebagai Variable Moderasi atas Related Party Transaction, Struktur Modal dan Ukuran Perusahaan terhadap Nilai Perusahaan?

The aim of this study is to investigate the effects of related party transactions and overall business value on capital structure, company size, and an independent board of commissioners. The manufacturing businesses in the food and beverage subsector that were listed on the Indonesia Stock Exchange between 2017 and 2021 are the focus of this study. The research sample consisted of 60 data points from 12 firms that fulfilled predefined parameters, chosen through the use of purposeful sampling. This study employs a quantitative methodology, with Eviews software serving as the analysis tool. The study's findings demonstrate that the value of a firm is not significantly impacted by transactions involving related parties. On the other hand, a company's value is greatly influenced by its size and capital structure. The independent board of commissioners does not lessen the effect that capital structure and related party transactions have on the value of the company. Nonetheless, the effect of a company's size on its value might be lessened by an impartial board of commissioners. The following policies can be implemented by the business world based on the consequences of the research: First, the business sector needs an optimal capital structure, which includes using debt with suitable limits, in order to draw investors and build company value. In addition, using debt might lessen the tax liability of the business. Secondly, in order to draw in investors, big businesses need to manage their assets well.

Navigating the Implementation of Tax Credits for Natural-Gas-Based Low-Carbon-Intensity Hydrogen Projects

This paper delves into the critical role of tax credits, specifically Sections 45Q and 45V, in the financing and economic feasibility of low-carbon-intensity hydrogen projects, with a focus on natural-gas-based hydrogen production plants integrated with carbon capture and storage (CCS). This study covers the current clean energy landscape, underscoring the importance of low-carbon hydrogen as a key component in the transition to a sustainable energy future, and then explicates the mechanics of the 45Q and 45V tax credits, illustrating their direct impact on enhancing the economic attractiveness of such projects through a detailed net present value (NPV) model analysis. Our analysis reveals that the application of 45Q and 45V tax credits significantly reduces the levelized cost of hydrogen production, with scenarios indicating a reduction in cost ranging from USD 0.41/kg to USD 0.81/kg of hydrogen. Specifically, the 45Q tax credit demonstrates a slightly more advantageous impact on reducing costs compared to the 45V tax credit, underpinning the critical role of these fiscal measures in enhancing project returns and feasibility. Furthermore, this paper addresses the inherent limitations of utilizing tax credits, primarily the challenge posed by the mismatch between the scale of tax credits and the tax liability of the project developers. The concept and role of tax equity investments are discussed in response to this challenge. These findings contribute to the broader dialogue on the financing of sustainable energy projects, providing valuable insights for policymakers, investors, and developers in the hydrogen energy sector. By quantifying the economic benefits of tax credits and elucidating the role of tax equity investments, our research supports informed decision-making and strategic planning in the pursuit of a sustainable energy future.

Tax havens and transfer pricing strategies: Insights from emerging economies

AbstractThis study examines multinational companies in emerging markets, exploring their transfer pricing strategies for establishing tax havens. These companies employ various mechanisms (e.g., transfer pricing, profit transfers, and the reallocation of intangible assets) to minimize their tax liabilities. Today an increasing level of intangible assets facilitates smoother profit transfers to jurisdictions with lower tax burdens. Furthermore, these companies relocate their productive activities to tax havens, creating opportunities for corporate tax evasion and avoidance. Despite the efforts of governments and international organizations to propose the adoption of a minimum tax rate for different countries, these companies have been able to reduce or completely avoid paying taxes. Our study sample includes companies headquartered in emerging countries between 2010 and 2020. The study introduces some innovative elements, such as the variable “transfer pricing intensity,” which is derived from manual data collection. This variable enables analysis of the transfer pricing levels employed by multinational companies. In addition, a noteworthy contribution of this research is the use of an unconventional tax proxy known as AREA, which monitors the tax benefits associated with short‐ and long‐term debts. The results demonstrate that these companies employ a diverse range of instruments, often in combination, to reduce taxes in their conglomerates. These findings contribute significantly to a deeper understanding of the intricacies surrounding corporate tax optimization practices and provide valuable insights for governments in formulating robust policies that promote transparency and accountability in the international tax landscape.