The Effect of Corporate Diversification on Tax Aggressiveness in Brazilian Companies (original) (raw)
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Tax Aggressiveness and Corporate Financialization in Brazil
Journal of Accounting, Management and Governance, 2023
Objective: This study investigates the relationship between tax aggressiveness and corporate financialization in companies listed on Brazil's B3 Stock Exchange from 2009 to 2022. Method: The sample comprises 1,630 firm-year observations after excluding financial companies, firms with negative pre-tax income, and outliers. We employed a panel linear regression model, adjusting for fixed effects related to individual companies and specific years. We used metrics such as abnormal book tax differences (BTDA), effective tax rate (ETR), and Comprehensive Value-Added Tax Rate (CVATR) to measure tax aggressiveness. Originality/Relevance: This study is pioneering in exploring the nexus between tax aggressiveness and corporate financialization in Brazil, offering critical insights for local researchers, investors, policymakers, and financial analysts seeking to decipher the nuances of financialization and tax planning in Brazil's singular economic landscape. The innovative approaches proposed for quantifying financial assets provide invaluable analytical advancements tailored to the country's unique market conditions. Results: Our findings show a positive correlation between tax aggressiveness and corporate financialization. Firms employing aggressive tax strategies exhibited increased financialization. For robustness, dummy variables targeting aggressively taxed firms were introduced, confirming the initial relationship. CVATR emerged as a particularly effective metric in the Brazilian context due to its complex tax structure. Theoretical/Methodological contributions: Our research introduces innovative approaches for measuring financial assets tailored to Brazil's unique market conditions. It also enriches the current body of literature by confirming CVATR as an effective metric for capturing tax aggressiveness in Brazil.
Tax aggressiveness of government-controlled corporations in Brazil
Revista Contemporânea de Contabilidade, 2020
This article examines whether government control of companies is a factor influencing tax aggressiveness, through a comparative analysis of these firms versus privately controlled companies listed on the BM&FBovespa. The analysis covers the period from 2009 through 2013 and aggressiveness is measured by three metrics: effective tax rate (ETR), book-tax difference (BTD) and tax burden disclosed in the statement of value added, which we call the tax rate on added value (TRAV). The results of the regressions confirm the main hypothesis regarding taxation of profit and also of gross revenue, because government-controlled corporations had significantly higher ETR and TRAV, indicating less tax aggressiveness. Although the result for BTD was not conclusive to indicate the aggressiveness profile, based on the other two variables, it can be stated that shareholding control by the government is a factor determining lower tax aggressiveness in Brazil.
Foreign Capital Participation and Tax Aggressiveness in Brazilian Companies
Management and Business Research Quarterly, 2020
This study explores the relationship between tax aggressiveness and foreign capital participation in Brazilian companies listed on the BM&F BOVESPA from 2010 to 2015, using the concept of tax aggressiveness as a reduction of taxable income through tax management and planning (Chen et al., 2010). Observing that previous studies show a significant relationship between tax aggressiveness and ownership structures, this research seeks to understand whether this relationship is significant if there is foreign capital participation in the company. The sample was composed of Brazilian companies listed on the BM&F BOVESPA. Two metrics of tax aggressiveness were used to investigate this relationship: effective tax rate (ETR) and book-tax difference (BTD). The use of these metrics was inspired in a review on tax research by Hanlon and Heitzman (2010), who concluded that ETR and BTD could capture the reduction of taxable income through tax planning. The results showed no significant relationship between foreign capital participation and tax aggressiveness, demonstrating that the origin of equity capital is not a factor of tax aggressiveness.
Market concentration and implicit taxes: analyzing Brazilian firms
RAUSP Management Journal, 2024
Purpose-This study aims to explore the interplay between market concentration and implicit tax burdens in Brazil, offering a fresh perspective on the conventional belief of perfect competition. Design/methodology/approach-Data was sourced from Brazilian firms on the B3 stock exchange between 2011 and 2021. Multiple linear regression techniques were employed to analyze the relation of explicit tax rates to firms' pre-and post-tax returns. Findings-Dominant firms in the market tend to bear a lower implicit tax burden and have the capacity to extend tax incentive benefits to shareholders. Research limitations/implications-The findings highlight Brazil's intricate corporate tax fabric, particularly regarding implicit taxes. They provide a foundation for deeper inquiries into how market dominance, taxation policies, and corporate strategies converge. Practical implications-Regulators and business leaders can harness this knowledge to recalibrate tax strategies and market regulations. Specifically, a closer examination of the dynamics that permit reduced implicit tax implications in monopolized markets is essential for equity. Social implications-Companies with pronounced market concentration can mitigate their implicit tax burdens, potentially offloading them to consumers and suppliers. This points to potential inequities in current tax structures. Originality/value-This research unveils nuanced insights into Brazil's multifaceted interrelations between corporate influence, taxation strategies, and market forces.
Tax Aggressiveness and Corporate Sustainability in Brazil
The present research aims to observe whether the participation of companies in the Corporate Sustainability Index (ISE) listed in BM&FBovespa defines behavior regarding tax aggressiveness. The companies listed or not in ISE were evaluated in the period from 2010 to 2014 through two measures of tax aggressiveness: the effective tax rate ETR (Effective tax Rate) and the difference between Book Tax Differences-BTD). By hypothesis, it was speculated that the companies listed in the index would be less tax aggressive to signal a behavior consistent with a social concern. However, a rational theory was not found to justify this anticipated relationship, and in fact, corporate sustainability, to a certain extent, could even be related to more efficient tax planning. Fiscal aggressiveness involves the use of techniques that privilege tax planning to reduce its explicit taxation, and in certain circumstances legal techniques (elision) and other illegal techniques are used, either because of their abusiveness in form or even because they have character to reduce the tax burden. The results documented in the research indicated that the companies that make up the ISE tend to be less tax aggressive those that do not participate in the ISE. This finding serves to anticipate the tax behavior of a company in function of the values that it prestige.
2021
Muhammad Husnain, Muhammad Imad-ud-din Akbar, Muhammad Mudassar Anwar, Muhammad Tasnim Khan, Assistant Professor, Department of Business Administration, University of Sahiwal, Sahiwal 57000, Pakistan, Assistant Professor, Management Sciences Department, National University of Modern Languages, Lahore campus, Pakistan, Assistant Professor, Department of Commerce, University of Kotli Azad Jammu and Kashmir, Kotli, Pakistan, University of Management and Technology, Lahore, Pakistan, Email: m.husnain@uosahiwal.edu.pk
Tax aggressiveness: a literature survey
Objective and Method: The objective in this article is to review the international and Brazilian studies on tax aggressiveness, considered as the behavior of trying to avoid or minimize the explicit tax burden for the corporation. As an academic research theme, tax aggressiveness or tax avoidance reveals to be a diversified and vast topic, although relatively recent. Results and Contributions: Among the research questions developed in this theme, the identification of the determinants of the company's tax aggressiveness is highlighted, considering: (i) company characteristics; (ii) environmental attributes; (iii) gatekeeper restrictions; and (iv) incentives for the firms. The determinants of the managers' tax aggressiveness and the influence of governance and the control structure are reviewed. In addition, the potential economic-financial consequences of tax aggressiveness for the firms and the existing empirical proxies to measure tax aggressiveness are identified. The study is closed off with the presentation of future research opportunities on the theme.
Tax avoidance and tax disclosure: A study of Brazilian listed companies
2021
This study analyzes the effect of tax avoidance on corporate transparency in Brazilian listed companies. The research was based on a sample of 256 non-financial companies listed in the Brazilian stock exchange (B3) from 2010 to 2018. A disclosure index was developed considering the BR GAAP(CPC 32), and tax avoidance measures (Effective Tax Rates –ETR, Cash Effective Tax Rate –CashETR, and Book-Tax-Differences –BTD) were used as explanatory variables in a panel. The findings revealed that tax avoidance has a negative influence in corporate transparency and that the industry and commerce sectors, company size, the level of leverage and profitability, have a positive influence in information disclosure
Revista Catarinense de Ciência Contábil, 2023
Implicit taxes reduce the pre-tax return rate due to investment tax preferences, contrasting with direct, explicit taxes paid to the government. This paper explores implicit taxes in Brazilian publicly traded firms within the differentiated Corporate Governance segments of [B]3 from 2011 to 2021. Using a focused methodology that tests two hypotheses, the study demonstrates that firms in these segments bear a higher implicit tax burden and have their explicit tax benefits supplanted by implicit ones. Results specifically reveal that companies in differentiated segments experience lower pre-tax investment returns than others, pointing to weakened tax management levels. This concise analysis underscores the complex relationship between implicit and explicit taxes and corporate governance practices, necessitating further research for comprehensive understanding.
Efficient Tax Planning: An Analysis of its Relationship with Market Risk in Brazil
Australian Journal of Basic and Applied Sciences, 2014
Objective: This paper addresses the following question: Is a firm's risk perceived by the financial market influenced by the efficiency of its tax planning? Besides responding to this question, two other objectives are: (a) to relate the concepts of tax planning proposed by Scholes and Wolfson (1992) with the concepts of tax avoidance and governance; and (b) to propose the construction of an indicator of efficient tax planning and a model for its estimation. Results: This paper contributes to the modern theory of corporate tax avoidance by identifying evidence that a firm's tax efficiency, achieved by successful tax planning, reduces their risk in relation to the capital market, as long as this is accompanied by good corporate governance practices. Research data were obtained from three sources: (a) information from the value added statement (VAS); (b) data obtained from the Economatica; and (c) information on the level of corporate governance. Employing a sample of 86 companies listed on the BM&FBovespa, drawn from eight economic sectors over a five-year period, we performed panel-data regressions by the OLS method with fixed-effect estimators, seeking to identify the variables that explain the firms' market risk (beta). Conclusion: The findings indicate there is a negative and significant relation between market risk and the tax planning efficiency index of firms that have good governance practices. Our findings are based on an interdisciplinary approach involving tax planning and the theory of tax avoidance, besides studies in the areas of finance and risk, all of them considered together within the framework of corporate governance and agency theory.