Tax Risk Research Articles

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.

The significance of tax risk for Polish companies based on the findings of an empirical study

Discussion of the problem of tax risk based on the empirical study. The paper explains the main aspects of tax risk, tax risk areas and its assessment. Critical analysis of existing literature and tax laws. Conclusions are formulated using a deductive method in the framework of tax theory and based on the analysis of tax laws and the author’s survey into the problem of tax risk conducted in the Wielkopolskie voivodeship in 2020. The survey results show that managers are increasingly aware of the tax risks associated with the activities of their companies and the industries in which they operate. They also indicate that, regardless of their size, companies should use tax risk management systems aligned with their tax strategies and managed by qualified staff. The article contributes to the analysis of tax risk.

Enhanced HS Code Classification for Import and Export Goods via Multiscale Attention and ERNIE-BiLSTM

Accurate classification of import and export goods’ Harmonized System (HS) codes is essential for ensuring tax security. Applying text classification technologies for HS code classification can significantly enhance the prevention and control of customs tax risks. However, the goods text is a semi-structured one that involves multi-domain Chinese professional vocabulary, which poses challenges for current classification models. These models often suffer from inadequate text representation and imprecise feature extraction. To address these challenges, we propose a novel classification model ERNIE-BiLSTM-Channel attention–Spatial attention (EBLCS). This model integrates ERNIE (Enhanced Representation through Knowledge Integration) with a Bidirectional Long Short-Term Memory Network (BiLSTM) and employs multi-scale attention mechanisms. The ERNIE-BiLSTM model provides a more comprehensive and accurate representation of the goods text, effectively capturing the global features of the text. By introducing channel attention and spatial attention mechanisms, greater weights are assigned to important words and word embedding dimensions, significantly enhancing the model’s ability to perceive key information. The experimental results on a customs dataset demonstrate that the EBLCS model consistently outperforms various baseline models across all evaluation metrics, effectively enhancing the performance of HS code classification.

The Influence of Tax Avoidance and Tax Risk on Debt Costs in Property and Real Estate Sector Companies Listed on the Indonesia Stock Exchange

This study aims to empirically test the effect of tax avoidance and tax risk on debt costs in property and real estate sector companies listed on the Indonesia Stock Exchange. The research used a quantitative approach with secondary data in the form of financial reports presented by the company as a basis for collecting data. The population in this study were property and real estate sector companies listed on the Indonesia Stock Exchange with reports that became research data for the period 2019-2022 with a total population of 91 companies. The sampling method used was purposive sampling with the criteria of companies that had been listed and had not experienced losses during the research year and there were 21 companies. This study uses Descriptive Statistical Tests, then Classical Assumption Tests, then continued with Hypothesis Tests. The results of this study indicate that tax avoidance has a positive and significant effect on debt costs, tax risk also has a significant negative effect on debt costs.

The Guarantee Function of Transfer PricingDocumentation and Its Role in Tax Risk Management

The article discusses the crucial role of transfer pricing documentation in the operations and taxation of entitiesengaged in transactions with related parties. It includes an analysis of the guarantee function of transfer pricingdocumentation, which involves providing tax authorities with information to assess the market nature of transactionsand protect taxpayers from challenging the terms of these transactions. The mechanisms of this documentation,its practical application, and the benefits it brings to taxpayers are also discussed. The article presentsexamples from the case law of administrative courts and analyzes the regulations on transfer pricing in corporateincome tax.

Transfer Pricing End-of-Year Adjustments in Spain

Transfer pricing year-end adjustments are common practice in Spain and are accepted by the Spanish tax authorities provided that they are well grounded on an appropriate functional and economic analysis. However, attention must be paid to certain aspects to avoid tax risks.

The Effect of Tax Avoidance, Tax Risk, Audit Tenure, on Firm Value Through Financial Performance

The Effect of Tax Avoidance, Tax Risk, Audit Tenure, on Firm Value Through Financial Performance

Improving tax control: tax risks and control data

The article is devoted to new opportunities for using digital technologies of the Federal Tax Service, analysis of changing, in connection with this, requirements for accounting programs, innovative methods of conducting analytical work of tax authorities to identify deviations and gaps in key reporting indicators, financial statements provided by taxpayers with others available to tax controllers , databases. Within the framework of the article, the author reveals changes in tax and financial reporting requirements that came into force in 2024 and provides recommendations regarding possible risks that the Federal Tax Service pays attention to during desk audits. The author also formulates how taxpayers should act in order to protect their organization from claims and sanctions of the Federal Tax Service.

MECHANISM OF TAX CONSULTING IN THE MANAGEMENT OF THE TAX COMPONENT OF ENTERPRISE ECONOMIC SECURITY

The article considers the mechanism of tax consultancy as an important element of the management of the tax component of the economic security of an enterprise, which is particularly relevant in the context of constant changes in tax legislation and growing requirements for transparency of financial statements. Tax consultancy is a complex process of providing companies with qualified assistance in the field of tax planning, optimisation of tax liabilities and management of tax risks. It is substantiated that tax consulting not only helps to reduce the tax burden, but also ensures compliance of the company's tax policy with the requirements of current legislation, which, in turn, is a guarantee of long-term stability and financial sustainability of the company. The article examines the structural elements of the tax liability management mechanism, which include tax planning, ensuring conditions for timely and correct calculation of tax liabilities, as well as organisational and control components. Particular attention is paid to the analysis of the tax planning process as one of the key stages of tax consulting. It is determined that effective tax planning allows an enterprise to optimise the structure of income and expenses, thereby reducing the tax burden and ensuring the rational use of financial resources. This paper considers the methods of ensuring compliance with tax reporting requirements as an important factor in the process of tax consulting. The function of tax consultancy in the formulation and execution of strategies designed to mitigate tax risks and enhance the efficacy of enterprise financial management is established. The necessity of utilising contemporary information technologies in the domain of tax consulting is underscored, as this enables the enhancement of the precision and efficacy of managerial resolutions pertaining to taxation. It can be concluded that effective tax consulting plays a pivotal role in enhancing the economic resilience of an enterprise. It serves to fortify the enterprise against external and internal threats, including those posed by shifts in the tax environment and economic challenges.

Tax Employee Careers and Corporate Tax Outcomes*

We examine how corporate tax outcomes, consisting of tax avoidance and tax risk, relate to the career outcomes of employees who work in the tax department. Using tax employee data obtained from the professional networking website LinkedIn, we find that both tax avoidance and tax risk are linked to tax employee career outcomes. Specifically, we find that tax employees’ turnover is positively associated with adverse tax outcomes, evidenced through lower tax avoidance or higher tax risk. Moreover, we find that the employment gap for tax employees after exiting the firm is positively associated with these adverse tax outcomes. Lastly, we find that the probability of an external promotion for a tax employee upon joining a new firm is negatively associated with the adverse tax outcomes faced by the previous employer. Collectively, these results suggest that tax employees may experience negative career outcomes when their firms face adverse tax performance. Our study highlights the consequences that tax avoidance and tax risk may have on the individuals who produce these outcomes. Our study also sheds light on the incentives that drive tax employees to cooperate with their firm’s tax-related objectives.

ALTERNATIVE WAYS TO MANAGE COOPERATION IN TAX RELATIONS: CHALLENGES OF DIGITALIZATION AND TAX COMPLIANCE

The recent advancements in tax administration have witnessed a significant shift from traditional paper-based reporting to comprehensive digitalization of tax filing and analysis processes. The integration of information and communication technologies into tax relations, alongside the enhancement of tax systems through digital tools—such as electronic registration of tax invoices, electronic reporting, and electronic verification—has streamlined processes and improved tax compliance. However, it remains essential to investigate whether merely transitioning to electronic reporting suffices and to explore alternative management methods for interactions between businesses and regulatory authorities. This article aims to substantiate the patterns of change in tax relations due to the evolution of information technologies and to evaluate alternative options for ensuring the accuracy of tax reporting metrics, which could enhance tax compliance levels. Tax management, a subset of overall management, allows for the assessment and analysis of the impact of the tax environment on business operations amidst uncertainty. The challenges posed by the evolving tax landscape, including legislative volatility and subjective interpretations by regulatory bodies, necessitate a reevaluation of tax management practices. Furthermore, the increasing volume of data enables tax administrations to focus limited resources on addressing serious tax violations. This dynamic calls for a shift towards automation and digitization of accounting practices, paving the way for electronic audits. Despite the progress in electronic administration, the core criterion for tax compliance remains the submission of accurate tax reports and the fulfillment of tax obligations. The article discusses the OECD's recommendations for developing alternative cooperation frameworks between tax authorities and businesses, emphasizing the need for transparency and predictability in tax relations. In conclusion, successful transformation of tax relations between businesses and the state requires more than just electronic reporting; it necessitates a unified source of information for assessing tax risks and ensuring compliance. Ukraine is encouraged to adopt advanced practices for identifying tax risks and facilitating electronic tax audits, thereby enhancing the overall efficacy of tax administration

Write-off of grants (subsidies) in the context of the principles of administrative and tax procedure and tax risk management

Grants are funds from the state budget, budget of local government units and state purpose funds allocated on the basis of this Act, separate acts or international agreements for financing or co-financing of the implementation of public tasks, subject to specific settlement rules. The Public Finance Act also includes definitions of three types of subsidies: purpose-specific, subject-specific and object-specific. With regard to subsidies, the legislator in the provisions of the Public Finance Act points out that subsidies for local government units and subsidies for tasks specified in separate acts constitute a special purpose for the allocation of expenditures of the state budget and orders to include in annexes to the budget act: a list of units receiving purpose-specific and subject-specific subsidies and amounts of subsidies and the scope and amounts of subject-specific and subject-specific subsidies, defines subsidies (together with subsidies) as a separate group of expenditures of the state budget.

Evolution of the Content of the Service Function of the Tax Authorities

The subject of the study is the activities of the Federal Tax Service (FTS of Russia), which annually strives to fulfil the objectives of not only increasing tax revenues to the budgets of the budgetary system of Russia, but also to improve the quality level of its activities. The key tool for the fulfillment of this goal for more than a decade remains digital technologies, allowing primarily for the improvement of tax control. Aim and objectives of the study. The analysis of the evolution of the development of technologies of control activity of tax authorities has led to the conclusion that strategically the control activity of the Federal Tax Service of Russia is increasingly built on the changing significance of other functions of tax authorities, among which the tax authority highlighted the service function. The article considers the foundations of the origin of the service function of tax authorities, transformation processes and development prospects taking into account new tools of interaction between tax authorities and taxpayers. At the same time, it touches upon the new services of the Federal Tax Service of Russia, as well as current directions of solving acute issues, in particular, the transition to EDI, the expansion of tax monitoring subjects, construction of a digital tax code, new tools for pre-trial consideration of tax disputes and minimization of tax risks. The study ultimately resulted in the construction of a scheme of the digital outline of the Russian tax system with the allocation of promising areas for further development.

Вопросы применения медианного значения рыночного интервала в регулировании трансфертных цен

Material changes in the tax regulation of transfer pricing have occurred in the early 2024, such changes include the introduction of the median value of the market price interval (financial parameters). This is a new instrument in the regulation of transfer pricing, its introduction was not justified in the bill discussion period, but its effect is significant for tax obligations of Russian companies. The new instrument in the transfer pricing system creates additional risks for taxpayers, as well as for the state in terms of economic relations with regard to timely and full calculation and payment of taxes, as well as for parties to international economic activities and internal relations. This predetermines the research subject: the conditions of and procedure for applying the median value for the purposes of tax control of intracompany transaction prices. The research methodology is based on an analysis of transfer pricing recommendations of the ОECD in АННОТАЦИИ Налоги № 2-2024 47 АННОТАЦИИ terms of applying statistical tools to determine the price of the transaction under analysis, provisions of foreign regulations that determine the pricing procedure in transactions between related entities. Special attention is paid to an analysis of foreign court judgments on determination of the market price of intracompany transactions. An analysis of the ОECD recommendations has given an opportunity to single out obligatory conditions for the application of the median value. The author has identified a tendency towards harmonization of approaches to using the median value in foreign countries and the general trend to clarifying regulations in 2022-2024. The judicial practice shows that irrespective of the activity type or type of transactions performed by group subdivisions, courts award uniform judgments in terms of applying the median value and take into account the ОECD recommendations when passing a judgment. The paper concludes that Russian taxpayers face an additional tax risk rooted in the differences in the approach towards the application of the median value in the Tax Code of the Russian Federation and the OECD Transfer Pricing Guidelines for transnational corporations and tax administrations used to regulate taxation of transactions between related entities in explanations of tax authorities and the judicial practice. The scientific novelty of the study lies in the determination of tendencies towards applying the median value for transfer pricing purposes, evaluation of tax consequences of the novelty for Russian taxpayers.

Sustainable development, economic policy uncertainty and tax risk

Purpose Unpredictable economic landscapes have led to a continuous escalation in global economic policy uncertainty (EPU). Improving risk management and sustainability in an environment with high macro risk is critical for business development. This study aims to explore the impact of corporate sustainable development on corporate tax risk. Design/methodology/approach After using a sample of companies that were A-share listed on the Shanghai and Shenzhen stock exchanges from 2011 to 2021, this paper applies ordinary least squares and a moderate effect model. Findings Better environmental, social and governance (ESG) performance can weaken corporate tax risk by improving green innovation capability, reputation and information transparency. Meanwhile, the restraining effect of ESG on tax risk was more significant amid high EPU. These impacts were amplified amid higher market competition, lower tax supervision and a lower degree of corporate digital transformation. Practical implications The findings emphasize the need for the government to establish a healthy business and tax environment so that enterprises can improve sustainable development and increase their risk management abilities, especially post-COVID-19. Social implications This study guides enterprises and the entirety of society to in paying attention to and promoting ESG practices, which can enhance enterprise tax management. Originality/value This study expands the research on the economic consequences of sustainable development and the factors influencing corporate tax risk and EPU.

Developing Economic and Mathematic Models of Company Tax Burden Taking into Account Specific Features of Industry

The importance and appraisal of enterprise tax burden is underlined by its serious impact on its finance and business functioning. In order to conduct a high-quality tax controlling, cut tax risks and achieve optimal tax burden the author focuses attention on studying theoretical principles and approaches to estimating the impact of tax burden on business activity of the organization. Through analyzing economic and mathematic methods of assessing company tax burden elaborated by Russian scientists, focus was made on the importance of investigating this indicator within the frames of econometric modeling with the help of language R. To estimate the impact of tax burden on results of business activity and finance and economic factor on the amount of tax burden the article proposed to build models with panel data, whose shaping can help identify steps aimed at upgrading tax control and tax burden management.

Does digital tax enforcement drive corporate digitalization? Evidence from the Golden tax project III in China: A pre-registered study

This pre-registered study executes the empirical design approved in the associated pre-registered report (Chen and He, 2024) to analyze the interaction between the tax enforcement and corporate behavior based on a digital perspective, with the Golden Tax Project III in China as the quasi-natural experiment. The study finds following conclusions: 1) the implementation of the Golden Tax Project III significantly promotes the firm digitalization. 2) the Golden Tax Project III has formed a regulatory impact on firm tax risk management, driving firms to promote digitalization for better tax risk management. 3) the promotion effect of the Golden Tax Project III on the firm digitalization helps to improve firms' total factor productivity. This article extends the economic consequences of tax digitalization and provides a new perspective for promoting high-quality economic development through the coordinated advancement of digital government and digital economy.

Environmental risk factor disclosures in the 10-K reports of U.S. energy companies

Purpose: This study examines changes in the volume and specificity of environmental risk factor disclosures in the 10-K reports of U.S. energy companies between 2017 and 2021. Methodology/approach: A total of 210 reports were analyzed using the content analysis method, a specificity index, the Wilcoxon signed-rank test and the Pearson correlation coefficient. Findings: Starting from the 2019 reports, the volume of environmental risk factor disclosures increased significantly year on year. In the 2021 reports, energy companies provided, on average, 31% more information than in 2017 reports (measured by word count). This growth was due to changes in the volume of disclosures on climate-related risk factors. However, the increase was not accompanied by an increase in detail. The level of specificity in the disclosure of both climate-related and other environmental risk factors was low (with the former being higher) and did not change significantly over the period considered. In general, boilerplate language was often used when dis-cussing environmental risk factors. Research limitations/implications: The findings suggest the need for regulators to detail requirements for specific disclosures on environmental risk factors. Originality/value: Previous studies based on 10-K reports examined the disclosures regarding any risk, tax risk, mergers and acquisitions risk, and security risk. This pa-per is the first to analyze the volume and specificity of disclosures devoted to environ-mental risk factors. In addition, it provides a more complete picture of environmental risk reporting practices by considering climate-related and non-climate-related risk factors separately.

Transformation of the mechanism of tax regulation in order to improve the standard of living of the population

Tax regulation is a crucial factor in driving economic growth and societal cohesion by effectively balancing fiscal responsibilities and incentivizing behavior. The collection of financial resources through taxation serves the dual purpose of meeting fiscal needs and facilitating strategic goals in public financial management. In today’s context, establishing a strong connection between tax regulation and the improvement of living standards is essential. Enhancing the framework of tax regulation mechanisms can significantly impact socio-economic dynamics by ensuring taxation is adaptable to evolving circumstances. Fiscal authorities must prioritize improving the quality of tax administration and refining models for managing state tax risks. This article seeks to refine the mechanisms involved in shaping and implementing tax regulation with the aim of improving living standards. The study proposes that providing accessible and reliable information about tax policies and budget allocations can foster greater societal tax responsibility. Transparency in government spending helps alleviate concerns about the prudent use of taxpayer funds, ultimately influencing people’s livelihoods positively. Keywords: tax regulation, standard of living, tax regulation, tax policy, taxes, economic development, social stability.

Investigating tax risk’s influence on tax avoidance and debt costs: evidence from France

Purpose This paper aims to examine the impact of tax avoidance on the cost of debt. It also investigates the effect of tax risk on the relationship between tax avoidance and the cost of debt. Design/methodology/approach Two hypotheses are tested on a sample of nonfinancial French firms listed in the société des Bources Françaises 120 index from 2010 to 2022 using the feasible generalized least squares. To ensure the robustness of the findings, the authors changed the measures of tax avoidance and tax risk and used instrumental variable regression to effectively address concerns related to endogeneity. Additional analysis is conducted to examine if the relationship between tax avoidance and the cost of debt varies based on the magnitude of tax risk. Findings The authors found that tax avoidance negatively affects the cost of debt. However, when tax avoidance is associated with a high risk, it impacts positively the cost of debt. Practical implications This study’s findings are relevant to firms, creditors and French lawmakers. Creditors must make their decision to grant credit based simultaneously on proxies of tax avoidance and tax risk. Managers must effectively manage tax risks to protect their financial decisions, urging French policymakers to implement new regulations on corporate tax risk management. Originality/value To the best of the authors’ knowledge, this study is the first to have investigated the joint impact of tax avoidance and tax risk on the cost of debt in the French context.