Journal of Finance and Banking Review A Theoretical Review on Corporate Tax Avoidance: Shareholder Approach versus Stakeholder Approach (original) (raw)
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A Theoretical Review on Corporate Tax Avoidance: Shareholder Approach versus Stakeholder Approach
GATR Journal of Finance and Banking Review, 2019
Objective - Although corporate tax avoidance is a widely discussed topic in the literature, conflicts do emerge when it is analyzed through the context of primary corporate duty. Should companies, in managing their taxes, solely honor their obligation to increase shareholders' wealth or should they cater to the interests of all their stakeholders? Such conflicts are especially evident in the inconsistent empirical observations on how corporate tax avoidance relate to corporate social responsibility (CSR), which makes the dearth of theoretical analysis on this issue even more conspicuous. Taking into account the socio-political nature and human elements in corporate tax avoidance, theoretical analyses from social sciences' perspectives are becoming markedly crucial. Methodology/Technique – This paper critically reviews the extant literature for discussions on how corporate tax avoidance is influenced by the dissenting approaches towards primary corporate duty. Findings – By a...
Tax avoidance, tax management and corporate social responsibility
This study examines the effect of three measures of corporate social responsibility (CSR) — corporate governance, community and diversity on tax avoidance in firms that use auditor‐ provided tax services. This is one of the first studies, to our knowledge, to empirically relate tax avoidance, tax management and CSR literature. By separating the strengths and concerns for each CSR measure, we are able to analyze the effects of a firm's negative and positive social actions on tax avoidance. We find that the interaction of community concerns with tax management fees positively affects both GAAP and Cash ETR, while the interaction of corporate governance strengths and diversity concerns with tax management fees negatively affects Cash ETR. Our results are similar when we use Excess ETR that is not explained by firm specifics. We find additional evidence that CSR affects tax avoidance when we divide firms into portfolios based on CSR levels. Our findings suggest that future studies on tax avoidance and tax management should incorporate CSR.
The British Tax Review, 2016
While there have been regular debates on corporate tax avoidance, a distinguishing feature of the current interest is the involvement of a wider audience which includes society in general. By analysing both tax related disclosures in company annual reports and corporate social responsibility reports the authors examine how managers of companies who have been subject to specific criticism of their alleged tax avoidance respond to such criticism. Using a legitimacy theory framework to identify four disclosure themes: explicit tax philosophy, implicit tax philosophy, tax conduct and tax contribution, companies’ reports for the 11 year period 2004–2005 to 2014–2015 have been analysed. The authors have found what appears to be evidence of inconsistency on the part of managers in identifying appropriate responses which the authors attribute to uncertainty as to the status of tax avoidance. The uncertainty is apparent in variation over time both within companies and between companies and i...
Corporate social responsibility and tax avoidance: A comment and reflection
Accounting Forum, 2013
This paper is a response to Sikka's 'Smoke and Mirrors: Corporate Social Responsibility and Tax Avoidance'. We believe that 'Smoke and Mirrors' (hereafter S&M) identifies an area of considerable importance but that it is misleading and problematic for several reasons. First, it glosses over the important distinction between tax avoidance and tax evasion. Despite using the term 'tax avoidance' in the title, to establish its conclusion, the paper relies predominantly on a handful of examples involving fraud, deceit and corruption, which are behaviors usually associated with 'tax evasion'. In the context of corporate social responsibility, we explain why this distinction is crucial and offer directions for future research in this area. Second, Sikka's paper ignores voluminous extant research on tax compliance, corporate tax avoidance and its relationship with CSR. Third, the paper mis-reports key statistics on the tax gap in the UK and US, and finally, it omits a robust discussion of the considerable policy response to corporate tax avoidance, which has been promoted by numerous tax agencies and international organizations such as the OECD. In the current paper, while recognizing the merits of S&M, we highlight the problems listed above, seek to remedy them, identify additional areas of concern and encourage further research attention in this area.
Tax Governance as a Part of Corporate Social Responsibility
10th International Scientific Conference “Business and Management 2018”, 2018
Nowadays, responsible business conduct and corporate social responsibility (CSR) prioritized at the governmental level. Even more and more companies now report on CSR. Financial transparency, in particular responsible tax governance considered to be as a part of CRS. Authorities propose to update CRS guidelines and involve guidance on responsible tax policies. The goal of the current research was to was get an insight into the understanding of CSR by Latvian business sector representatives with the particulat focus on tax management issues. Representatives of Latvian companies from different sectors of economy were surveyed, using the authors' developed questionnaire. The respondents were offered to evaluate a range of statements regarding the understanding of the CSR concept as a combination of diffrenet elements, the awareness of the European Parliament's Directive on disclosure of non-financial information, as well as attitude to tax management in the framework of CSR. The results of the given research provide a platform for further investigation in the field of CSR in Latvian business environment.
Restaurant Business, 2019
This study was to analyze corporate social responsibility (CSR) and the application of good corporate governance (GCG) could reduce action tax avoidance action (T.Avoid) on manufacturing companies. The sample used a public company listed on the Indonesia Stock Exchange. This study design using quantitative methods, and testing hypotheses by using Partial Least Square method with Smart PLS. The result is a significant direct effect of CSR and GCG against T.Avoid with values t-Statistics (61.558and 20.616) is greater than t-table (1.985).While the indirect effect, the results are significant CSR and GCG against T.Avoid through profitability as an intervening variable with a value of t-Statistics(23.094) is greater than t-table (1.985).Implications government needs to give attention to CSR and corporate governance practices that can reduce T.Avoid. T.Avoid even did not rule can be omitted, so that revenues can be maximized sector through taxation to fund the development of the State.
Suripto, 2024
Research aims: This study examines the role of corporate social responsibility in moderating the effect of earnings performance and institutional ownership on corporate tax avoidance of companies in the Investors 33 index between the 2018-2022 period. Design/Methodology/Approach: This study developed and estimated two regression models with panel data of 165 observations. These models were estimated by the random effect estimator. Research findings: This study found that corporate social responsibility strengthens the negative effect of earning performance on corporate tax avoidance. Companies with high earnings performance and those more socially responsible are likely more compliant in paying taxes. It confirms the corporate culture theory in Indonesian companies with relatively high share performance. On the other hand, this study also uncovered that corporate social responsibility increases the positive effect of institutional ownership on corporate tax avoidance. The large percentage of institutional ownership balanced by more corporate social responsibility activities could trigger companies to engage in more significant tax avoidance. These findings indicate that institutional investors of 33 companies in the investors index are more oriented on returns than company reputation. Theoretical contribution/Originality: As far as known, this study is the first to explain the moderating role of corporate social responsibility on the effect of earnings performance and institutional ownership on corporate tax avoidance in the context of companies with high share performance. Practitioner/Policy implication: This study urges the government to supervise the corporate social responsibility activities issued by companies to ensure that they are not generated as a corporate tax avoidance motive. Research limitation/Implication: This study did not check for possible bias caused by outlier data. This study also did not control how institutional investors are represented on the board of commissioners, so the effect of IO tends to be difficult to explain based on this perspective.
Does Tax Transparency Tackle Tax Avoidance? A Stakeholder Perspective
International Journal of Advances in Management and Economics, 2018
The present work approaches the research question: Does tax transparency through mandatory corporate tax return disclosure tackle tax avoidance? Tax avoidance has far-reaching social implications. The aim of this study is to shed light on tax avoidance and to help mitigate its adverse social repercussions. The research is inspired by The United Kingdom Corporate and Individual Tax and Financial Transparency Bill, which was proposed, albeit unsuccessfully, during the 2010-2015 UK Parliament. The implications of a tax return disclosure regime are assessed against the WPP Group, a major UK public company listed on FTSE 100. The stakeholders affected by corporate tax return disclosure are analysed using the Power-Interest-Matrix. Their power is assessed through financial indicators derived from the company’s financial statements. Their interest is scrutinized through vocabulary analysis with the Form-Oriented Content Analytic Method. The impact of the disclosed tax avoidance on the stakeholders and their response are mixed. There are numerous pathways available depending on the stakeholder group and their incentives. Also, stakeholders of the same group do not behave unanimously. These findings are supported by empirical evidence from Europe, Asia and the USA. In order to channel dispersed stakeholder activity the study makes a proposal to introduce a threshold for parties interested in corporate tax information. The author is not aware on any tax avoidance research combining the Power-Interest-Matrix and the Form-Oriented Content Analytic Method. This enhances the originality of the study and may encourage other scholars to enrich their research inventory through these instruments.
Corporate Social Responsibilityand Tax Avoidance
This study focused on the impact of corporate social responsibility (CSR) on tax avoidance in Nigeria. In a bid to achieve this, data was collected from the annual reports and accounts of banks quoted on the floor of the Nigerian stock exchange. From the analysis carried out it was observed that return on asset was found to have a positive relationship with tax avoidance. CSR was found to have a positive relationship with tax avoidance. It was also found to be non-statistically significant when tested at 5% level of significance. The last variable which is firm size was found to have a negative relationship with tax avoidance. It was however not found to be statistically significant when tested at 5% level of significance. It was therefore recommended that if an organisation wants to avoid tax it must first of all utilize it resources to the best capacity. Corporate social responsibility is a major means of avoiding taxes due to the fact that the cost involved in engaging in corporate social responsibility is very high so therefore it is lessening the tax burden that is due to an organisation. Also, the size of firm is not a major determinant of the level of tax avoidance.
Corporate Social Responsibility and Tax Aggressiveness in Perspective Legitimacy Theory
International Journal of Economics, Business and Accounting Research (IJEBAR)
The company as a business entity seeks to provide high dividends for shareholders. On the other hand as a corporate taxpayer, companies must set aside profits to pay taxes. Tax aggressiveness can be used to minimize this conflict. But this action is not liked by shareholders because it can damage the company's reputation. By referring to the legitimacy theory, corporate social responsibility (CSR) is considered as an action that can maintain the company's reputation. The question is whether corporate social responsibility has an effect on tax aggressiveness. In fact the results of the research on this matter vary. This study aims to reexamine the influence of corporate social responsibility, from the economic, social, and environmental dimensions to tax aggressiveness. The tests were carried out using 62 data from 31 companies listed on the Indonesia Stock Exchange during 2016-2017. Effective tax rate (ETR) is used to measure tax aggressiveness, CSR is measured using the Glo...