Financial Constraints and the Incentive for Tax Planning

Edwards, Alexander; Schwab, Casey M.; Shevlin, Terry

doi:10.2139/ssrn.2163766

Cited by 66 publications

(63 citation statements)

References 28 publications

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“…6 Companies facing financial distress will deal with an increasing cost of capital, decreasing access to financial sources, lower credit rating, and a general willingness to take a higher risk by managers, which alters management perspectives on tax aggressiveness. In this condition, few options will propel companies to increase the level of its tax aggressiveness.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…[1][2][3] Previous research shows that management has incentives to carry out tax aggressiveness activities, even if there are marginal benefits. 4,5 Financial distress could be considered one such incentive for pursuing tax aggressiveness activities, as financial constraints faced by a firm increase the marginal benefits of tax saving, and exceed its marginal costs 6 . On the other hand, a higher proportion of external directors can reduce tax aggressiveness activities.…”

Section: Introductionmentioning

confidence: 99%

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The Influence of Financial Distress and Independence of Board of Commissioners on Tax Aggressiveness

Dhamara¹,

Violita²

2018

Proceedings of the 6th International Accounting Conference (IAC 2017)

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This research aims to examine the influence of financial distress and the independence of boards of commissioners on tax aggressiveness. The study uses 97 manufacture firms listed on the Indonesia Stock Exchange from 2010 to 2013. Using a regression method, the findings show that the financial distress and independence of boards of commissioners have no significant influence on tax aggressiveness. High corporate governance scores do not guarantee a good practice. This research also proves that financial distress has no moderating effect on the association between commissioner independence and tax aggressiveness, since the independence of boards of commissioners does not have a significant effect on tax aggressiveness.

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Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The Influence of Financial Distress and Independence of Board of Commissioners on Tax Aggressiveness

Dhamara¹,

Violita²

2018

Proceedings of the 6th International Accounting Conference (IAC 2017)

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“…Thus, it can be concluded that investors must establish systems that can guarantee having positive impacts for conducting tax planning activities upon their earnings. Edwards et al, (2013) aimed at investigating the relationship between financial constraints-whether on the macroeconomic or private company level -and the money saved by a tax planning activities as a source of company's internal funds. It is expected that there are factors that encourage companies to take measures to increase their internal funds through resorting to conducting tax planning activities and measuring financial constraints on the basis of macroeconomic measures (using the gross domestic product and imposing restrictions upon bank loans).…”

Section: ) -Strategies For Obtaining Tax Cutsmentioning

confidence: 99%

The Impact of Tax Planning in Industrial Public Joint Stock Companies upon the Performance of the Industrial Companies Listed in the Amman Stock Exchange Market

Alduneibat¹,

altawalbeh²,

Hashem³

2017

AFR

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The purpose of this current study is seeking to shed a light on the issue of tax planning which is considered to be one of the most significant topic that are related to the matters of tax. It has become something significant to investigate and identify the impact of tax planning in industrial public joint stock companies upon the performance of the Industrial companies listed in the Amman stock exchange market. The method of this study adopted the analytical descriptive approach the population of the current study includes financial managers who were working in Jordanian industrial public joint stock companies. The total number of those companies is 66 companies in Jordan. The result of the study there is an impact for conducting tax planning in industrial public joint stock companies upon the performance of the Industrial companies listed in the Amman stock exchange market the recommendation of the study has proposed the following the researcher recommended exerting much efforts to raise awareness of companies' managers and employees about the legal consequences of tax evasion.Keywords: Tax Planning, Industrial Companies, Performance, Stock exchange IntroductionFinancial and tax reports are characterized with having their own disclosure rules for disclosing expenses and revenue. According to the financial accounting rules, the value of the revenue is verified upon ensuring that the standards of disclosing revenues are met and the same applies to the incurred expenses. The desire to enter a record of the real value of the revenue varies among companies because such desires have an impact upon the tax rate that shall be set. For instance, the greater the value of the revenue is, the grater the tax rate would be (Chen et al., 2007). Companies do not take marginal tax rate into consideration when making additional decisions. Many researchers have concluded that the companies which suffer from high tax rates-that have exceeded the maximum limit -suffer from having many debts that are due to be paid (Zarai, 2013).Additionally, studies have found that high levels of debt (either as a result of high tax rates or due to managerial decisions) negatively impact the competitiveness of a firm in the market (Checherita-Westphal & Rother, 2012;Riasi, 2015). Which means that in long term, firms that are highly leveraged, will suffer from revenue losses (Ansari & Riasi, 2016;Aghdaie et al., 2012) Tax planning is considered to be one of the financial instruments that many funders depend on in funding their enterprises and companies and it's a major element of administrative and financial planning. Furthermore, tax planning is considered an ongoing policy which is not used during a certain period of time only. In addition this process takes into consideration all the administrative decisions related to taxes. It also takes into consideration the strategies used for reducing the burden of incurred taxes to the minimum limit as much as possible. This process doesn't aim at evading taxes or reducing them directly. In fact, ...

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“…Such situations may lead companies into difficult financial circumstances. It is welldocumented that firms facing financial constraints exhibit lower cash effective tax payments (Edwards, Schwab and Shevlin, 2013;Chen and Lai, 2012). Indeed, financially-constrained firms engage in tax avoidance more aggressively than financially unconstrained firms.…”

Section: Corporate Taxmentioning

confidence: 99%

Do Natural Disasters Hurt Tax Resource Mobilization?

2015

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According to several reports, natural disasters and climate change will intensify and dampen development if appropriate measures are not implemented. Our paper contributes to this literature and analyzes the impact of natural disasters on domestic resource mobilization in developing countries. Using propensity score matching estimators over the period of 1980-2012 for 120 developing countries, our results conclude that government revenues decrease in the aftermath of natural disasters. Moreover natural disasters that occur in border countries have a negative impact on government revenues of neighbor countries. However, the adverse effects of natural disasters are dampened in countries with high level of resilience capacity and stronger governance.

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Financial Constraints and the Incentive for Tax Planning

Cited by 66 publications

References 28 publications

The Influence of Financial Distress and Independence of Board of Commissioners on Tax Aggressiveness

The Influence of Financial Distress and Independence of Board of Commissioners on Tax Aggressiveness

The Impact of Tax Planning in Industrial Public Joint Stock Companies upon the Performance of the Industrial Companies Listed in the Amman Stock Exchange Market

Do Natural Disasters Hurt Tax Resource Mobilization?

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