rac700-g1 presentation 31july2010_3
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RAC700
RESEARCH
METHODOLOGY INACCOUNTING
Presented for:
PM Dr. Nagarethnam Thirumanickam
Presented by:Dayang Norfarisah 2009988921
Norsyarida Samat 2009137851
Sh. Farah Hilwani 2009971267
Zaidy Izwan Tham 2009352583
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PRESENTATION1
Research Topic
Research Questions/Problems
Problem Statement
Objectives
Research Paradigm
Sampling
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RESEARCHTOPIC
Tax Planning and Corporate Effective TaxTax Planning and Corporate Effective Tax
RateRate
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ABSTRACT
Tax Planning and CorporateEffective Tax Rate
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PROBLEMS STATEMENT
In order to promote our industries, Malaysia has taken several steps in
attracting new investors as well as helping the other corporations with various
incentives. One of main incentives given was Tax Incentives. Tax Incentives
given will lessen tax burden of corporation so that the corporation can
maximize its wealth with lesser tax to be paid.
Statutory Tax Rate (STR) and Effective Tax rate (ETR) are different rate
aroused due to the tax incentives given to the corporations. While Gupta &
Newberry (1997) stated that ETR between 10% to STR are normal, this study
want to examine if there is any corporation in Malaysia that has ETR less than
10%. If the effective tax rate less than 10%, this indicate tax evasion/fraud has
taken place.
The issue here is by giving these tax incentives to these corporations, will it
able to curb tax evasion among corporations? This study is significant to know
the determination of these corporations in their tax planning or tax evasion
behavior.
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RESEARCH
PROBLEMS/QUESTIONS
- What is the impact of tax policy and tax planning activities of Malaysian listed
firms during the new tax regime?
- What is the level and the variability of corporate ETR?
- What is the relationship between corporate financial and investment policiesand its ETRs (i.e. ETR determinants)?
- What is the relationship of the book-tax difference?
- What is the tax fraud indicators that can be identified in Annual Report?
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OBJECTIVES
The main objective:
to examine the impact of tax policy and tax planning activities of
Malaysian listed firms during the new tax regime.
The specific objectives:
y To examine the level and the variability of corporate ETR;y To examine the relationship between corporate financial and
investment policies and its ETRs (i.e. ETR determinants);
y To examine the relationship of the book-tax difference; and
y To examine tax fraud indicators.
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RESEARCHPARADIGM
Positivistic to generalize findings from sample
Analytical research aims to understand phenomena by discovering
and measuring causal relations among variables
Quantitative - using large scale and the data is highly specific and
precise due to the data is collected from Annual Reports available at
Bursa Malaysia website.
Reliability is high as the data analyze by SPSS.
Quantitative approach collect numerical data from ARs.
No. of sample is high i.e. 100 companies over 5 years period of
2005-2009 (Firm-years 500)
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PRESENTATION2
Literature Review
Theory
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LITERATUREREVIEW
o 3 different areas of literature review:
1. Corporate effective tax rate
- Gupta, S. and Newberry, K. (1997) - Determinants of the variability in
Corporate Effective Tax Rates: Evidence from Longitudinal Data
- Lillian Mills, Kaye Newberry & William B. Trautman (2002) Trends in
Book-Tax Income and Balance Sheet Differences- Mihir A. Desai (2002) The Divergence Between Book & Tax Income
- Plesko, G. A and Shumotsky, N. (2004) - Reconciling Corporation Book
and Tax Net Income
- Md Noor, R., Mastuki, N., and Bardai, B. (2008) - Corporate Effective
Tax Rates: A Study On Malaysian Public Listed Companies
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LITERATUREREVIEW..
2. Tax fraud in Malaysia
- Deloitte & Touch (2001) Tax Audits & Investigations: Meeting the
Challenges
- McGill & Outslay (2004) Lost In Translation: Detecting Tax Shelter
Activity in Financial Statements
- H. Wayne Cecil, Raymond L. Placid & Carl Placini (2009) Income
Tax crime & Government Response in US 1998-2007
- Kathleen A. Kaminski, T. Sterling Wetzel & Liming Guan (2004) Can
Financial Ratios Detect Fraudulent Financial Reporting?
- Daniel Ho & PeterLau (1999) Tax Audits in Hong Kong
3. Tax reform in Malaysia
- Md Noor, R., Mastuki, N., and Bardai, B. (2008) - Corporate Effective
Tax Rates: A Study On Malaysian Public Listed Companies
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THEORIES
Expectancy theory
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PRESENTATION3
Hypotheses Development
Research Framework
Research Design
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HYPOTHESES DEVELOPMENT
Hypotesis Explanation
H1 There is a significant difference in effective tax rate
between hundred companies.
H2 The effective tax rate diverges significantly from the
statutory tax rate.
1st Objective - to examine the impact of tax policy and tax planning
activities of Malaysian listed firms during the new tax regime.
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HYPOTHESES DEVELOPMENT
Hypotesis Explanation
H8 There is a significant difference in utilization of tax
incentives between companies.
H9 There is a significant difference in utilization of exempt
income between companies.
H10 There is a significant difference in disallowable expenses
between companies.
H11 There is a significant difference in utilization of losses and
capital allowance between companies.H12 There is a significant difference in deferred tax
expense/credit between companies.
3rd Objective
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HYPOTHESES DEVELOPMENT.
Hypotesis Explanation
H13 There is a significant difference in the ratio of sales over
total assets between companies.
H14 There is a significant difference in the ratio of gross profitover sales between companies.
H15 There is a significant difference in the ratio of receivables
over sales between companies.
H16 There is a significant difference in the ratio of working
capital over total assets between companies.H17 There is a significant difference in the ratio of inventory over
sales between companies.
4th Objective
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RESEARCHFRAMEWORK
Samples
- Samples are selected from three industries i.e Trading & Services,
Consumer products and Technologies
- Samples are pro-rated between the three industries and randomly
pick
-All samples are listed in Bursa Malaysia
Variables/ Data Collection
- Data collection involves an examination of tax and non-tax data
from companies financial statements available in its annual report
Estimation Procedure
- Data will be analysed using SPSS with Descriptive and Univariate
Analysis including T-test & ANOVA
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RESEARCHFRAMEWORK..
IV
Pretax income (PTI)
Current tax expense (CTE)
Deferred tax expense (DTE)
Total assets (TA)
Long term debts (LTD)
Fixed assets (FA)
Inventory (INV)
Tax incentives (TAXINC)
Exempt income (EXEINC)
Disallowable expenses (DISEXP)
Absorbed losses and capital
allowance (LOSSCAP)
Equity (E)
Sales (SALES)
Receivables (REC)
Working capital (WC)
Gross profit (GP)
Total debts (TD)
DV
Tax Evasion & Tax
Avoidance
Hypotheses type:
Alternate Hypothesis to examine
that IV & DV are associated with
one another using Descriptive and
Statistical Analysis
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RESEARCHFRAMEWORK
VARIABLES USED TO MEASURE ETR DETERMINANTS:
Hypotesis Numerator Denominator
H3 Log of total assets -
H4 Long term debts Total assets (neutralize size of
assets.H5 Pretax income Total assets
H6 Fixed assets Total assets
H7 Inventory Total assets
VARIABLES USED TO MEASURE CURRENT-BASED ETR:
Current Tax Expense/Pretax Income
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RESEARCHFRAMEWORK.
VARIABLES USED TO MEASURE BOOK-TAX DIFFERENCE:
Hypotesis Numerator Denominator
H8 Tax incentive specific incentives:
- Double deductions/ Utilization of
reinvestment allowance
Pretax income
H9 Exempt income general incentives:
- Lower tax rate/Foreign income/
Exempt income/ Income not subject
to tax/ Non-taxable income/ Non-
assessable income
Pretax income
H10
Disallowable expenses Pretax incomeH11 Absorbed losses and capital
allowance
Pretax income
H12 Deferred tax expenses Pretax income
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PRESENTATION4
Samples Samples are selected from three industries i.e. Trading &
Services, Consumer products and Technologies because thesethree industries received numerous tax incentives from MalaysianGovernment
Samples are pro-rated between the three industries andstartified randomly pick
All samples are listed in Bursa Malaysia
Variables/ Data Collection Data collection involves an examination of tax and non-tax data from
companies financial statements available in its annual report
Estimation Procedure Data will be analysed using SPSS with Descriptive and
Univariate Analysis including T-test & ANOVA
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The selection of the sample is focusing
on public listed companies in Bursa
Malaysia in different sectors or
industries for examine tax planning andcorporate tax effective.
This sample taken because can
measuring the aggressiveness of taxplanning activities undertakes by each
company.
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CONCLUSION
Is representativeness of sample is criticalin this study? YES
Probability Sampling main purpose togeneralize the findings from individual
company
Our method: Stratified Simple RandomSampling
Sample: Public Listed Companies atBursa Malaysia from Trading &
Services, Consumer products andTechnologies Industries (100 companies)
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THANKYOU!!!
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