مقاله انگلیسی رایگان در مورد کاربرد بهشت مالیاتی، قیمت گذاری خدمات حسابرسی و غیر حسابرسی، الزامات گزارش اتفاقات مشکوک و امکانات خط ویژه افشاگر – الزویر 2021

Highlights

Abstract

Keywords

JEL Classifications

1. Introduction

2. Background

3. Research design

4. Empirical results

5. Conclusion

Declaration of Competing Interest

References

Abstract

This study examines whether tax haven use by Australian financial corporations is associated with the pricing of audit and non-audit services. It also analyzes whether the existence of financial corporations’ suspicious matters reports (SMRs) and whistle blower hotline facilities moderate the association between tax haven use and pricing of audit and non-audit services. We find a positive association between tax haven use and the pricing of audit and non-audit services. Our results are economically significant. For example, audit fees for financial corporations with tax haven use is around 23 per cent higher compared to corporations with no tax haven use, while non-audit fees for financial corporations with tax haven use is around 13 per cent higher compared to corporations with no tax haven use. We also find that the existence of SMRs and whistle blower hotline facilities both moderate the positive association between tax haven use and audit pricing. Overall, our results suggest that tax haven use has serious consequences for financial corporations’ pricing of audit and non-audit services, whereas SMRs and whistle blower hotline facilities assist corporations to reduce the risks concerning tax haven use.

1. Introduction

Tax haven1 use by multinational corporations (MNCs) typically involves the concealment of the nature and origin of funds, which makes it difficult for tax authorities to determine the source and applicable tax liability relating to those funds (De Simone et al., 2019). Tax havens are characterized by secrecy in banking practices, a weak regulatory framework and a zero (or nominal) tax rate, so they represent ideal jurisdictions for MNCs to retain funds offshore, in addition to conducting earnings management, money laundering and tax evasion activities (Desai, 2005; Desai et al., 2006a; 2006b; 2016; Department of Treasury, 2015; De Simone et al., 2019). At the extreme, subsidiaries incorporated in tax haven jurisdictions by MNCs could be responsible for the treasury function of the corporate group as a whole. We are motivated to conduct this study for several reasons. First, Oxfam Australia estimates that Australian corporations have used tax havens to avoid around AUD $4.8 billion in corporate taxes in 2014, accounting for about 90 percent of corporate profits (Oxfam, 2014). We argue that tax haven use facilitates large agency problems in MNCs (e.g., rent extraction and/or resource diversion by managers), as the benefits of doing so are likely to be greater than the costs (Dyreng and Lindsey, 2009; Lisowsky, 2010; Lisowsky et al., 2013). The use of tax havens provides managers with opportunities to engage in rent extraction or resource diversion (Dharmapala and Hines, 2009; Atwood and Lewellen, 2019; Wood and Lewellen, 2019). Associated financial reporting obfuscation then makes it more difficult for audit firms to fully assess MNCs risks, leading to increased audit risk and increases in the pricing of audit and non-audit services. Thus, it is important to determine whether Australian financial corporations’ use of tax havens is associated with the pricing of audit and non-audit services