rac700-g1 presentation 31july2010_3

8/9/2019 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.

5Tax Planning and CorporateEffective Tax Rate


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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


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.


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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rac700-g1 presentation 31july2010_3

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