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Determinants of Corporate Tax Avoidance Strategies among Multinational Corporations in Malaysia

Fazliza Mohd Kasim

,

Natrah Saad

Fazliza Mohd Kasim 1
Natrah Saad 2


  1. Inland Revenue Board Malaysia. 1

  2. Tunku Puteri Intan Safinaz School of Accountancy, Universiti Utara Malaysia; Tunku Puteri Intan Safinaz School of Accountancy, Universiti Utara Malaysia, 06010 Sintok, Kedah, Malaysia. 2

Pages: 74-81

DOI: 10.18488/journal.74.2019.62.74.81

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Article History:

Received: 15 April, 2019
Revised: 21 May, 2019
Accepted: 27 June, 2019
Published: 09 August, 2019


Abstract:

Tax avoidance has been widely discussed around the globe, particularly among multinational corporations (MNCs). The MNCs are reported to have better opportunities to engage in aggressive tax planning techniques. Hence, this study examines the determinants of MNCs tax avoidance strategies by looking at their effective tax rates (ETRs). This study utilized the tax return form data from the Inland Revenue Board Malaysia (IRBM) to model ETRs of the MNCs in Malaysia, as a proxy of the tax avoidance. Regression analysis was performed in order to meet the objectives of the study. The findings suggest that MNCs in Malaysia can be associated with the tax avoidance since their ETRs are below the statutory tax rates (STRs) as stipulated under the Income Tax Act 1967. The results also suggest that firm’s size, profitability, extensiveness of foreign operation, capital intensity and leverage are the determinants of the tax avoidance of MNCs in Malaysia. The findings would assist the policymakers on the selection criteria of audit cases by focusing on MNCs with high profitability, extensive foreign operation, capital intensity and high leverage.
Contribution/ Originality
This study contributes to the literature by examining the determinants of MNCs tax avoidance strategies by looking at their effective tax rates (ETRs).

Keywords:

Corporate tax avoidance, Effective tax rate, Multinational corporations, Malaysia.

Reference:


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Funding:

This study received no specific financial support.

Competing Interests:

The authors declare that they have no competing interests.

Acknowledgement:

Both authors contributed equally to the conception and design of the study.

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