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Analyses Corporate Tax Evasion

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Question:

Discuss about the Analyses Corporate Tax Evasion.
 
 

Answer:

Introduction

In different occasions, it has been found that number of the Australian firms is seen to be engaged in the activities associated to transfer pricing. In several instances, it has been identified that the “Australian Tax Office (ATO)” has asked several Australian companies, which is related to tax evasion and provide rationale for lower profit even after earning substantial amount of revenues.  ATO has further stated this as perceiving the profit to a lower degree and by adopting various types of intercompany expenses being transferred in the lower tax regions (McGuire, Wang and Wilson 2014).

The main aspect of the report is aimed to write a report to the Deputy Commissioner of Taxation. This is mainly seen to be done for the   evaluation of concept by the agency theory in the different types of the Australia subsidiaries of the International corporations. The main concepts have been associated to find the varied range of theories, which are seen to be related to the transferring of the profits to a lower tax region (De Massis et al. 2014). The latter part of the report has been further aimed to explain the different argument based on the legitimacy theory which the ATO can use to encourage the various type of the Australian companies to record the different aspect of the theories which are seen to be related to recording the pay and the profits of the taxes in Australia.

 

Report on using the agency theory

The concept of transferring the profits to a lower tax region is referred to as transfer pricing. This is mainly seen to be implemented by the company to achieve a higher degree of the tax relaxation than it is given in the host countries. The main section associated to this concept discussed has been seen to be associated to the different types of the relevant purpose for reducing the overall rate of taxations in the host country. The main intention of this study is to interpret that the subsidiary companies choose to transfer profits to a lower tax region to maximize profits (Bodie 2013).

Agency cost is seen to be associated to the cost, which has been identified with a direct relevance with the different types of the link of the data with the various types of the internal costs. The different type of the cost related to this concept has been seen to be related to because of the principal and agent. This cost takes place among the shareholders and the management. It has been also seen that the shareholder identified the various types of the cost constraints associated to the agency theory has been related to the core cost because of the primary problems (Ewert and Niemann 2014). It has been further observed that the different types of the concepts under the agency costing theory has been identified in terms of principles relevant to equal growth of the company in a timely basis. It has been further been able to be identified that the different types of the concepts related to the agency theory in tracing of taxation costs. It has been seen to be conducive in terms of understanding of the different types of the associations of the cost related to the issues which are seen to be associated to the implantation of the relevant costs as per suggested by the agency theory. It has been also seen that the different types of industries based in Australia has been seen to be identifying the various types of these theories to track and mitigate the various emerging issues concerning this matter (Lee, Dobiyanski and Minton 2015). These are observed in terms of the several types of the theories, which are associated to the different types of the concepts such as the focus by the different types of the companies for the problems associated to the agency issue. In several types of the other aspects of the study it has been able to be further discerned that the different types of the  issues associated to the agency problem has been able to be discussed in terms of the considerations  made in terms of the achieving the relevant details conducive for the success of the business organizations. The man aim of the company has been seen to be associated to the different types of the concepts, which are related to solve the various types of the problems by the incorporation of the agency theory or existence of agents (Hong et al. 2016).

 


In case of the small Australian companies, the main association of the agency theory has been identified in form of the advantage, which is obtained by the subsidiary companies in compare to the large organizations. It has been further identified that the various types of the considerations made by the large corporations has been seen to be directly associated to the different obligations of the licenses and the absence of the operations in a tax haven region. In the former case the subsidiary companies has been seen to get the main advantage related to solve the various types of the advantages which are seen to be made in the field of the tax obligations. In many cases, it has been identified that the various types of the subsidiary company has been seen in terms of the advantages for its presence in the foreign location. In this case the subsidiaries of the international companies are seen to be identified with certain additional source which are identified to be particularly beneficial in terms of the various type of the considerations which are seen in terms of advantages related to the availability of the various types of the contacts (Durnev, Li and Magnan 2017). It is also seen in terms of the agents who can prove to be helpful in terms of reducing the various types of the associated costs. Some of the other benefits of  the agency theory has been discerned in terms of the various type of the other benefits has been further been identified in terms of the several types aspects related to positive behavior of the firm and structure of the management (Dowling 2014).

Explanation of legitimacy theory that the ATO could use to encourage Australian companies

The different types of the consideration made in terms of the legitimacy theory has been identified in terms of the various types of the advantages which are seen to be made as per the different types of the guidelines provided in terms of the legitimacy of the country. The main concept of the legitimacy theory has been able to generalize the concept, which is seen to be associated to the important concept related to the assumptions made in terms of desirable, appropriate and proper norms and values. In the initiation of the concepts stated under the organizational behavior, it has been identified that the various types of the organizational has been able to incorporate the relevant theory of the legacy system by ensure proper recording of different components (Bradshaw, Liao and Ma 2016). To solve the different types of the consideration made in terms of the avoidance for taxation, Legitimacy theory plays a vital role. Legitimacy theory has the role of explaining the behavior of organizations in implementing and developing voluntary social and environmental disclosure of information in order to fulfill their social contract that enables the recognition of their objectives and the survival in a jumpy and turbulent environment (Armstrong et al.  2015).

 


The different types of the consideration made in the legitimacy theory has been identified in form of the various types of the solutions which are associated to resolve the different types of the necessary issues identified in terms of the identified areas such as the requirement to resolve the necessary issues related to the structure of the management, evolutionary process. Some of the other advantages of this has been further seen in terms of the various types of the decisions  taken the management to solve the various types of the issues associated to the clear the taxes. The main role of the legitimacy theory to encourage Australian companies to record their profits is mainly seen due to the varied range of the considerations has been mainly observed due its  fundamental behavior (Badertscher, Katz and Rego 2013). The conceptualization of the legitimacy theory has been able to explain the various types the theories that are conducive in explaining the various aspects of the developmental process. It has been further seen to be useful for resolving the various types the issues in the development of the overall voluntary social issues. These are seen to be related to the various types of the concepts such as the social perceptions and the different types of the evaluation, which are seen to be made in terms of the environmental disclosure and the payment of the taxes on time. In different occasion, it has been identified that the various types of the advantages seen to be associated to the various types of the issues, which has been stated as per the fundamental disclosures of the various types of the information, associated to the social perceptions (Lanis and Richardson 2015). This has been seen to be having a direct impact on the various types the aspect of the values of the organizations. The overall usefulness of the legitimacy theory has been identified in terms of the several types of the considerations which are seen to be associated to solve the various types of the issue associated to solve the various  types of the the relevant concepts for the payment of the taxes in regular basis. Some of the important concepts related to the report has been seen in terms of the various types of the consideration made in the explaining the organizations to resolve the various types of the issues associated to the tax and recording of the same (Tang et al., 2016). It has been seen that the different type of the effective roles, which are seen to be played by the companies, is directly relevant to the various types of the associated issues related to the recording and the identification of the several types of the factors, which are seen to be effective for taxpayers of different forms. Some of the other benefits have been further identified in terms of a computerized recording system of the various types of the receipts of the record of the taxes (Hashimzade, Myles and Black 2017). In the different types the of other aspects of the legitimacy systems it has been able to identified that the different type of the advantages of  this system has able to be effective for the companies to pay their taxes on time and in terms of the recording of the same in relevant regions (Li et al.  2016).

 

Conclusion

The main consideration made in the report has been able to focus in the different aspect of the study, which is seen to be related to the evaluation of the concept by the agency theory in the different types of the Australia subsidiaries of the International corporations. The second  part of the report  has been further aimed to explain the different argument based on the legitimacy theory which the ATO can use to encourage the various type of the Australian companies to record the different aspect of the theories which are seen to be related to recording the pay and the profits of the taxes in Australia. The important findings made in the report has been able to state on the important assumptions made in the various type of the role of the subsidiaries of the International organizations and the important aspects under this theory has been supported by the advantage, which is obtained by the subsidiary companies in compare to the large organizations. It has been further identified that the various types of the considerations made by the large corporations has been seen to be directly associated to the different obligations of the licenses and the absence of the operations in a tax haven region. Under the main benefits which has been seen in terms of the legitimacy theory, it has been identified that the several types the advantages under this theory has been able to be related to the various of the benefits in terms of timely recording and the payment of the taxes.

 

References

Armstrong, C.S., Blouin, J.L., Jagolinzer, A.D. and Larcker, D.F., 2015. Corporate governance, incentives, and tax avoidance. Journal of Accounting and Economics, 60(1), pp.1-17.

Badertscher, B.A., Katz, S.P. and Rego, S.O., 2013. The separation of ownership and control and corporate tax avoidance. Journal of Accounting and Economics, 56(2), pp.228-250.

Bodie, Z., 2013. Investments. McGraw-Hill.

Bradshaw, M.T., Liao, G. and Ma, M.S., 2016. Ownership structure and tax avoidance: Evidence from agency costs of state ownership in China.

De Massis, A., Kotlar, J., Chua, J.H. and Chrisman, J.J., 2014. Ability and willingness as sufficiency conditions for family?oriented particularistic behavior: implications for theory and empirical studies. Journal of Small Business Management, 52(2), pp.344-364.

Dowling, G.R., 2014. The curious case of corporate tax avoidance: Is it socially irresponsible?. Journal of Business Ethics, 124(1), pp.173-184.

Durnev, A., Li, T. and Magnan, M., 2017. Beyond tax avoidance: Offshore firms’ institutional environment and financial reporting quality. Journal of Business Finance & Accounting.

Ewert, R. and Niemann, R., 2014. A Theory of Tax Avoidance--Managerial Incentives for Tax Planning in a Multi-Task Principal-Agent Model.

Hashimzade, N., Myles, G. and Black, J., 2017. A Dictionary of Economics. Oxford University Press.

Hong, H.A., Lobo, G.J., Ranasinghe, T. and Ryou, J.W., 2016. Does the Onset of CDS Trading Increase Tax Avoidance?.

Khan, M., Srinivasan, S. and Tan, L., 2016. Institutional ownership and corporate tax avoidance: New evidence. The Accounting Review.

Lanis, R. and Richardson, G., 2015. Is corporate social responsibility performance associated with tax avoidance?. Journal of Business Ethics, 127(2), pp.439-457.

Lee, B.B., Dobiyanski, A. and Minton, S., 2015. Theories and empirical proxies for corporate tax avoidance. The Journal of Applied Business and Economics, 17(3), p.21.

Li, Y., Li, Y., Luo, Y., Luo, Y., Wang, J., Wang, J., Foo, C.T. and Foo, C.T., 2016. A theory of managerial tax aggression: evidence from China, 2008-2013 (9702 observations). Chinese Management Studies, 10(1), pp.12-40.

McGuire, S.T., Wang, D. and Wilson, R.J., 2014. Dual class ownership and tax avoidance. The Accounting Review, 89(4), pp.1487-1516.

Tang, T., Mo, P.L.L. and Chan, K.H., 2016. Tax collector or tax avoider? An investigation of intergovernmental agency conflicts. The Accounting Review, 92(2), pp.247-270.

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