TAX AVOIDANCE IN EMERGING COUNTRIES: IS A GAAR A SUITABLE MEASURE? (original) (raw)

MEASURES OF CORPORATE TAX AVOIDANCE: EMPIRICAL EVIDENCE FROM AN EMERGING ECONOMY

The prevalence of tax avoidance practices has necessitated several efforts in understanding the determinants of the menace. While these efforts are highly commendable, the studies so far lack the proper construct for measuring the term 'corporate tax avoidance'. This has posed some limitations to the interpretation of research findings in this respect. To this end, Hanlon and Heitzman (2010) proposed a measure for the conforming tax avoidance, which has not receivedany empirical investigation. The objective of this study, therefore, is to provide empirical evidence for or against the proposed measure. To achieve this objective, three established measures were compared with the proposed measure using the annual reports of the Malaysian top 100 companies based on FTSE tradable index. The results of the ANOVA and post hoc test show the proposed measure to be statistically and significantly different at 5%. The finding of the study is of great relevance for proper interpretation of research findings, especially within the context of the study.

Tax Structures in Developing Countries

2008

Tax policies seen in developing countries are puzzling on many dimensions, given the sharp contrast between these policies and both those seen in developed countries and those forecast in the optimal tax literature. In this paper, we explore how forecasted policies change if firms can successfully evade taxes by conducting all business in cash, thereby avoiding any use of the financial sector. The forecasted policies are now much closer to those observed.

Tax Structure in Developing Countries: Many Puzzles and a Possible Explanation

2005

Tax policies seen in developing countries are puzzling on many dimensions. To begin with, revenue/GDP is surprisingly small compared with that in developed economies. Taxes on labor income play a minor role. Taxes on consumption are important, but effective tax rates vary dramatically by firm, with many firms avoiding taxes entirely by operating through cash in the informal economy and others facing very high liabilities. Taxes on capital are an important source of revenue, as are tariffs and seignorage, all contrary to the theoretical literature.

Business Tax Evasion in Transition Economies:A Cross-Country Panel Investigation

2018

This paper uses the Business Environment and Enterprise Performance Survey data for the years 1999, 2002 and 2005 to investigate business tax evasion in 24 transition economies. We use both conventional fixed effects estimation and the recently developed Fixed Effect Vector Decomposition approach. The most robust finding in our study is the importance of institutional factors. In particular, higher levels of corruption related to tax administration and slower transition reforms substantially reduce the amount of taxes paid by businesses in transition economies. In addition, we find a positive relationship between evasion and tax rate; and identify minor effects of the macroeconomic environment. We also find that social norms play a significant role in tax evasion. These findings inform policy recommendations intended to reduce either the possibility and/or the inclination to evade.

Tools Used by Countries to Counteract Aggressive Tax Planning in Light of Transparency

SCHOUERI, L. E.; VALDERRAMA, I. M. ; MAZZ, A. ; QUINONES, N. ; WEST, C. ; PISTONE, P. ; ZIMMER, F. . Tools Used by Countries to Counteract Aggressive Tax Planning in Light of Transparency. INTERTAX (DEVENTER), v. 46, p. 140-155, 2018., 2018

The aim of this article is twofold. The first aim is to provide a comparative overview of the domestic anti-avoidance rules with specific reference to Brazil, Colombia, South Africa and Uruguay to evaluate the application of these rules to tackle aggressive tax planning. The second aim is to assess whether or not the application of general anti-avoidance rules (GAARs) in these countries is consistent and clear (transparent) for the taxpayer. The main argument is that to tackle aggressive tax planning, countries should have GAARs in accordance with the standard of fiscal transparency as developed in this article (i.e. availability, clarity, simplicity and reliability). Furthermore, the relationship between the taxpayer and tax administration should be enhanced considering mutual trust, legitimate expectations and respect for the taxpayers' rights. This article provides recommendations to enhance the relationship between tax administration and taxpayers to facilitate a coordinated relationship. Such a coordinated relationship means, on the one hand, that the governments (tax administrations) are provided access to the information regarding the activities of the taxpayer; and, on the other hand, that taxpayers voluntarily disclose the structure and nature of the economic activities or businesses in the country.

A partial race to the bottom: corporate tax developments in emerging and developing economies

International Tax and Public Finance, 2013

This paper assembles a new dataset on corporate income tax regimes in 50 emerging and developing economies over 1996-2007 and analyzes their impact on corporate tax revenues and domestic and foreign investment. It computes effective tax rates to take account of complicated special regimes, such as partial tax holidays, temporarily reduced rates and increased investment allowances. There is evidence of a partial race to the bottom: countries have been under pressure to lower tax rates in order to lure and boost investment. In the case of standard tax systems (i.e. tax rules applying under normal circumstances), the effective tax rate reductions have not been larger than those witnessed in advanced economies, and revenues have held up well over the sample period. However, a race to the bottom is evident among special regimes, most notably in the case of Africa, creating effectively a parallel tax system where rates have fallen to almost zero. Regression analysis reveals higher tax rates adversely affect domestic investment and FDI, but do raise revenues in the short-run.