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International Corporate Tax Avoidance Practices: Evidence from Australian Firms

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  • Taylor, Grantley
  • Richardson, Grant

Abstract

This paper examines the international corporate tax avoidance practices of publicly listed Australian firms. Based on a hand-collected sample of 203 publicly listed Australian firms over the 2006–2009 period (812 firm-years), our regression results indicate that there are several practices Australian firms use to aggressively reduce their tax liabilities. Specifically, we find that thin capitalization, transfer pricing, income shifting, multinationality, and tax haven utilization are significantly associated with tax avoidance. In fact, based on the magnitude and significance levels of the regression coefficients in our study, thin capitalization and transfer pricing represent the primary drivers of tax avoidance, whereas income shifting and tax haven utilization are less important. Finally, our additional regression results show that tax havens are likely to be used together with thin capitalization and transfer pricing to maximize international tax avoidance opportunities via the increased complexity of transactions carried out through tax havens.

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  • Taylor, Grantley & Richardson, Grant, 2012. "International Corporate Tax Avoidance Practices: Evidence from Australian Firms," The International Journal of Accounting, Elsevier, vol. 47(4), pages 469-496.
    • Handle: RePEc:eee:accoun:v:47:y:2012:i:4:p:469-496
    DOI: 10.1016/j.intacc.2012.10.004
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    5. Jaafar, Aziz & Thornton, John, 2015. "Tax Havens and Effective Tax Rates: An Analysis of Private versus Public European Firms," The International Journal of Accounting, Elsevier, vol. 50(4), pages 435-457.
    6. Haoran Xu & William J. Moser, 2022. "Terrorism and Corporate Tax Avoidance," Abacus, Accounting Foundation, University of Sydney, vol. 58(1), pages 174-208, March.
    7. Agus Bandiyono & Etty Murwaningsari, 2019. "Effect of Intra Group Transaction, Thin Capitalization and Executive Characters on Tax Avoidation with Multinationality as a Moderation," Journal of Accounting, Business and Finance Research, Scientific Publishing Institute, vol. 7(2), pages 82-97.
    8. Olfa Ben Salah, 2024. "Analyzing the Causal Relationship Between Tax Avoidance and Earnings Management: Evidence from The STOXX Europe 600 Index," Journal of Accounting and Management Information Systems, Faculty of Accounting and Management Information Systems, The Bucharest University of Economic Studies, vol. 23(1), pages 29-49, January.
    9. Dhawan, Anirudh & Ma, Liangbo & Kim, Maria H., 2020. "Effect of corporate tax avoidance activities on firm bankruptcy risk," Journal of Contemporary Accounting and Economics, Elsevier, vol. 16(2).
    10. Cernius Gintaras & Birskyte Liucija & Balkevicius Arturas, 2016. "Influence of Rules for Computing Corporate Income Tax on the Accuracy of Financial Statements of Lithuanian Companies," Scientific Annals of Economics and Business, Sciendo, vol. 63(1), pages 65-81, March.
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    13. Subagio Efendi & Salim Darmadi & Robert Czernkowski, 2022. "Are Financial Institutions Tax Aggressive? Evidence From Corporate Tax Return Data," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 25(2), pages 175-204, August.
    14. Suryana Amni & Dr. Ruhul Fitrios & Dr. Alfiati Silfi, 2023. "The Influence of Thin Capitalization, Capital Intensity, and Earnings Management on Tax Avoidance with Tax Havens Country as Moderator," International Journal of Science and Business, IJSAB International, vol. 20(1), pages 109-122.
    15. Taylor, Grantley & Richardson, Grant, 2014. "Incentives for corporate tax planning and reporting: Empirical evidence from Australia," Journal of Contemporary Accounting and Economics, Elsevier, vol. 10(1), pages 1-15.
    16. Benkraiem, Ramzi & Uyar, Ali & Kilic, Merve & Schneider, Friedrich, 2021. "Ethical behavior, auditing strength, and tax evasion: A worldwide perspective," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 43(C).
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    20. Leung, Sidney C.M. & Richardson, Grant & Taylor, Grantley, 2019. "The effect of the general anti-avoidance rule on corporate tax avoidance in China," Journal of Contemporary Accounting and Economics, Elsevier, vol. 15(1), pages 105-117.

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    More about this item

    Keywords

    International corporate tax avoidance; Thin capitalization; Transfer pricing; Income shifting; Multinational operations; Tax havens;
    All these keywords.

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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