12-Corporate Ownership, Governance and Tax Avoidance

Category: Governance, Tax
Last Updated: 25 May 2020
Pages: 2 Views: 58

The fact is that taxes deductions from the cash flows available to a firm, and therefore the dividends distributable to the shareholders, propose that firm owners would attempt to increase their wealth through various taxes to keep away from these Practices. Such types of advantages of enhanced cash flows from tax avoidance practices are ingenious with certain Non-tax costs.

This required the costs/benefits considering of such type of practices and the choice of tax avoidance if the interest outweigh the linked costs. Therefore, the benefits and the associated costs with corporate tax avoidance are discussed here. Prior to explanation, little awareness are provided on the meaning and measures of corporate Tax avoidance to give proper ground for the discussion in detail. The corporate tax avoidance lacks universal definition as it might connote "different thing to different People" (Hanlon & Heitzman, 2010:137).

The reality is that there is significant tax impacts on all settlement of a Company, meant to enhance its profit, could account for such shortness of universal definition. , they have different definitions of corporate tax avoidance put up by researchers in present times (for a review of these definitions see: Salihu, Sheikh Obid & Annuar, 2013; Salihu 2014). Here, explain corporate tax avoidance as a decrease the clear cut corporate tax liabilities.

Order custom essay 12-Corporate Ownership, Governance and Tax Avoidance with free plagiarism report

feat icon 450+ experts on 30 subjects feat icon Starting from 3 hours delivery
Get Essay Help

This definition is in line with Hanlon and Heitzman (2010) It explains tax avoidance "as a continuum of tax arrangements policies where something like municipal bond Investments are at one side (lower explicit tax, perfectly legal), Therefore , the terms Such as tax management; tax planning; tax sheltering; and tax aggressiveness are exchangeable used with tax Avoidance in the literature (see for instance: Chen et al. 2010; Lanis and Richardson, 2011; 2012; Minnick & Noga, 2010; Tang & Firth, 2011).

Similar to its definition, there have been many ways of corporate tax avoidance used in the prior Literature. These ways are mainly depended on the estimates from the financial statements and could be categorized into three classes/groups. The first group adds those measures that examine the multitude of the gap between book and Taxable income. All these consist of total book-tax gap; residual book-tax gap and tax-effect book-tax gap.

The Second group has to take up with those establish the evaluate the proportional amount of taxes to business income. All these having effective tax rates (this comes in several variants like accounting ETR; current ETR; cash ETR; Long-run cash ETR; ETR differential; ratio of income tax expense to operating cash flow; & ratio of cash taxes Paid to operating cash flow). The third group comprises other measures such as optional permanent differences (PERMIDIFF)/DTAX; unrecognized tax benefits (UTB); and tax shelter estimates.

Other than this plethora of measures of corporate tax avoidance used in the tax literature, its conforming aspect remains un-captured as most of the measures are computed based on items that are affected by accrual accounting Procedures. To this part, Hanlon and Heitzman (2010) proposed a measure for conforming tax avoidance as the Proportion of cash tax paid to operating cash flow. Salihu, Sheikh Obid and Annuar (2013) documented the significant difference of this measure from other similar measures. This study suggested the use this measure for the Empirical investigation given the context of the study.

Cite this Page

12-Corporate Ownership, Governance and Tax Avoidance. (2018, Aug 27). Retrieved from https://phdessay.com/12-corporate-ownership-governance-and-tax-avoidance/

Don't let plagiarism ruin your grade

Run a free check or have your essay done for you

plagiarism ruin image

We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

Save time and let our verified experts help you.

Hire writer