تاثیر هیئت مدیره ویژگی های نظارتی مدیر بر تهاجم مالیات بر شرکت ها : تجزیه و تحلیل تجربی

This paper examines the impact of board of director oversight characteristics on corporate tax aggressiveness. Based on a 812 firm-year dataset of 203 publicly-listed Australian firms over the 2006–2009 period, our regression results show that if a firm has established an effective risk management system and internal controls, engages a big-4 auditor, its external auditor’s services involve proportionally fewer non-audit services than audit services and the more independent is its internal audit committee, it is less likely to be tax aggressive. Our additional regression results also indicate that the interaction effect between board of director composition (i.e., a higher ratio of independent directors on the board) and the establishment of an effective risk management system and internal controls jointly reduce tax aggressiveness.

Corporate tax compliance programs undertaken by tax authorities such as the Australian Taxation Office (ATO) emphasize that the strength of a firm’s corporate governance structure has a major bearing on whether it is likely to engage in corporate tax aggressiveness1 (ATO, 2006 and ATO, 2010). In 2003, the ATO placed tax planning and compliance at the center of good corporate governance strategies (ATO, 2005). In 2005, the ATO recognized that there were encouraging signs that tax aggressiveness was increasingly being accepted as an important corporate governance issue for the board of directors to consider (ATO, 2005). In examining corporate governance and its association with tax aggressiveness, previous research (e.g., Desai and Dharmapala, 2006, Hanlon and Slemrod, 2009 and Chen et al., 2010) does not attempt to break-down corporate governance into its key components. Thus, previous research fails to determine which particular aspects of corporate governance have a significant impact on tax aggressiveness. Recent research by Lanis and Richardson (2011) shows that the composition of a firm’s board of directors influences its level of tax aggressiveness. However, no previous research has explicitly examined the association between other important board of director oversight characteristics (e.g., the effectiveness of a firm’s risk management and internal control systems) and tax aggressiveness. Tax authorities consider risk management to be an essential part of an effective corporate governance structure (ATO, 2006 and ATO, 2010). Corporate stakeholders have become increasingly concerned about whether a firm has a satisfactory risk management system and sufficient internal controls to alleviate significant firm-related risks (Henderson Global Investors, 2005, KPMG, 2005 and Erle, 2008), including tax risks dealing with the complexity of tax laws and regulations and potential uncertainties regarding the legal interpretation and application of tax laws and regulations in practice (Slemrod, 2004, Slemrod, 2007 and Graham and Tucker, 2006). Research by Dyreng et al., 2008 and Armstrong et al., 2012 and Rego and Wilson (2012) shows that it is uncertain whether executive management explicitly engage in aggressive tax strategies or whether they make aggressive financial, investment and other strategic decisions that lead to tax-aggressive behavior in the firm. It is possible that both avenues for tax-aggressive behavior are simultaneously present if the firm’s governance structures (including the risk management system and internal controls) are weak and audit-related monitoring mechanisms are lacking. The directors of many firms recognize that tax cannot be managed independently from a firm’s other business activities, and it can have a significant influence on the decisions that are made as a result of the transactions undertaken (KPMG, 2005 and Williams, 2007).2 However, there is a clear disparity in the understanding of tax considerations between the board of directors, internal audit, and a firm’s tax department (KPMG, 2005). In fact, a survey of board members found that only 22% of firms carried out regular formal reviews of the tax department by internal audit. Moreover, only 10% of tax departments felt that they were widely understood outside of the tax function (KPMG, 2005). Tax authorities consider that tax risk management is the responsibility of the board of directors (Killaly, 2009, D’Ascenzo, 2008 and D’Ascenzo, 2010). The reason for this is that tax is considered to be an ethical issue with a firm’s reputational capital at stake if tax arrangements become subject to public scrutiny and/or legal action (Williams, 2007 and Erle, 2008). The board is ultimately responsible for implementing policies, processes and systems to ensure that tax risk is minimized in the firm. This involves ensuring that the firm does not engage in activities that are designed primarily to avoid corporate taxes (Erle, 2008, Hartnett, 2008 and Schön, 2008). Thus, it is possible that tax aggressiveness may not only be detrimental to the firm, but it also could be regarded a socially irresponsible and illegitimate activity which can have a damaging effect on society as a whole.3 Potentially, tax aggressiveness could bring-about a significant shortfall in corporate tax revenue which could be used by government to fund the provision of public goods in society (Freedman, 2003 and Christensen and Murphy, 2004).4 Thus, corporate governance monitoring mechanisms should help to prevent tax aggressiveness in the context of a wider view of a firm as a ‘real world’ entity (Avi-Yonah, 2008 and Schön, 2008). The Australian Stock Exchange (ASX) also suggests that risk management and internal controls represent an important component of the corporate governance structure of firms and requires publicly-listed firms to disclose information about their risk management policies and internal controls (Group of 100 Incorporated, 2003). Nevertheless, the relationship between board-established corporate governance mechanisms (e.g., risk management systems and internal controls) and tax aggressiveness has not been adequately examined in the literature. This paper investigates the impact of board of director oversight characteristics on corporate tax aggressiveness. Based on a 812 firm-year dataset of 203 publicly-listed Australian firms over the 2006–2009 period, our regression results show that if a firm has established an effective risk management system and internal controls, engages a big-4 auditor, its external auditor’s services consist of proportionally fewer non-audit services than audit services, and the more independent is its internal audit committee, it is less likely to be tax aggressive. Our additional regression results also indicate that the interaction effect between board of director composition (i.e., a higher ratio of independent directors on the board) and the establishment of an effective risk management system and internal controls jointly reduce tax aggressiveness. Our study makes several important contributions to the literature. First, it builds on previous research by Desai and Dharmapala, 2006 and Hanlon and Slemrod, 2009 and Chen et al. (2010) that initially suggests a general association between corporate governance and tax aggressiveness and more specifically, research by Lanis and Richardson, 2011 and Lanis and Richardson, 2012 that provides evidence that board of director independence and corporate social responsibility (CSR) are significantly negatively associated with tax aggressiveness. We extend these previous studies by examining the impact of board of director oversight characteristics (i.e., an effective risk management system and internal controls and audit attributes) on tax aggressiveness. We note that the potential associations between board of director oversight characteristics and tax aggressiveness have not been examined before in the literature. To the best of our knowledge, this study examines these associations empirically for the first time. Second, as part of our additional analysis, we consider whether there is an interaction effect between board of director composition (i.e., a higher ratio of independent directors on the board) and the board establishing effective risk management systems and tax aggressiveness. This issue has also not been addressed empirically in the literature. Finally, our findings provide valuable information for policymakers and regulators about the fundamental linkages between board of director oversight characteristics and tax aggressiveness to help drive tax policy forward on the issue of good corporate governance practices in firms. The remainder of the paper is organized as follows. Section 2 considers relevant theory and develops our hypotheses. Section 3 summarizes the research design while Section 4 reports the empirical results. Finally, Section 5 concludes the paper.

This paper examines the impact of board of director oversight characteristics on corporate tax aggressiveness. Our regression results show that if a firm has established an effective risk management system and internal controls, engages a big-4 auditor, its external auditor’s services involve proportionally fewer non-audit services than audit services and the more independent is its internal audit committee, it is less likely to be tax aggressive. Our additional regression results also indicate that the interaction effect between board of director composition (i.e., a higher ratio of independent directors on the board) and the establishment of an effective risk management system and internal controls jointly reduce tax aggressiveness. This study provides unique insights into the nature and extent to which board of director oversight characteristics are associated with tax aggressiveness. In so doing, this study extends the literature on corporate governance and tax aggressiveness. Moreover, our findings regarding effective risk management systems, audit characteristics, board of director composition and tax aggressiveness should be of value to policymakers and regulators. In particular, our findings could assist in the development of policy on effective corporate governance practices and the extent to which these practices might assist tax authorities in dealing with tax aggressiveness. This study is subject to several limitations. First, the sample is limited to publicly-listed firms because we were only able to collect information about tax aggressiveness (e.g., ‘tax disputes’) that is in the public domain. Information about tax aggressiveness among private firms is not publicly available due to confidentiality concerns. Second, as the tax disputes considered in this study are limited to only those examined by the ATO for firms listed firms on the ASX, we acknowledge that our results may differ for firms operating outside of Australia, which are subject to different tax legislation enforced by the tax authorities and/or different stock exchange disclosure requirements, for example. Finally, we also should note that our significant empirical results are only indicative of associations between tax aggressiveness and our independent variables, not causation between these variables. Future research into corporate governance and tax aggressiveness could examine the practices which independent directors employ to determine the corporate tax risks of the firm. A better understanding of the means by which independent directors exert control over board actions relating to tax risks may be beneficial.