It is an initial step undertaken with a view to explore different factors of causes/reasons of tax evasion in Philippines. Income tax evasion affects the economy of the locale in which it happens and in addition upon the worldwide economy. The impacts of this wrongdoing may appear to be confined, yet as countries exchange and lead business with one another, the financial remaining of one nation will thus influence another. There are numerous explanations behind some economic activities to go unrecorded in the official statistics. Taxes are necessary to provide the services that individuals depend on.
Hence, tax avoidance often takes place at the margins of the tax code, in areas where the code is ambi - guous and in need of interpretation. In areas where the tax administration decides with a certain degree of discretionary authority, the distinction between avoidance and evasion is blurred. This becomes even more relevant if countries change the tax regulations concerning tax loopholes retroactively. In many instances, the distinction between tax avoidance and tax evasion is clear only from the ex post perspective, ultimately a post-court perspective.5 For this reason, tax evasion and tax avoidance are usually treated jointly, despite
Firstly, it enhances the ability of firm’s earning to measure firm’s performance. According to Financial Accounting Standard Boards, it illustrates that accrual accounting provide better information of firm’s earnings and it’s components in comparison with the information that cash flow accounting indicates. Secondly, due to the matching concept, accruals will reflect more closely firm’s performance than cash flow (Dechow, 1994). Dechow states that under the accrual basis, it plays a more important role than cash flow accounting in measuring the firm performance as accruals can mitigate timing and matching problem in the cash flow. Although in his research, there is a prediction that certain accruals are likely to be affected by the timing and matching problem, “this does not imply that special item should be excluded from earnings from continuing operation” (Dechow, 1994).
Capital Asset Pricing Model under Cross-Listings Now we will understand the effects of international cross-listings, so to understand how assets will be priced under the alternative capital market regimes we need to understand International Asset Pricing Model (IAPM) in a world, where some assets are internationally tradable while others are not so that means cross-listed assets are internationally tradable assets, while all other assets are internationally non tradable assets. Now recalibrate the CAPM formula Ra = Rf + (Rm-Rf)/Var(Rm))*Cov(Ra,Rm) βa= Cov(Ra,Rm)/ Var(Rm) Suppose that there are two countries in the world, the domestic country and The foreign country. In a completely segmented capital market where no assets are Internationally tradable, they will bte priced according to their respective country Systematic risk. For domestic country assets, the expected asset return is calculated as Ri = Rj + AD DCov(Ri,
The fact that production processes span multiple tax jurisdictions leaves room for companies to take advantage of country-level differences in tax policy to allocate revenues and costs across tax jurisdictions in a way that can limit their worldwide tax liability. And because companies no longer face an additional tax on foreign profits that are repatriated to the parent company, multinational corporations would have a greater incentive to avoid Kenyan tax. Due to these concerns, countries with territorial corporate tax systems set up rules to define how and if foreign profits are taxed, as well as rules that prevent base erosion and profit shifting. Territorial corporate tax systems can end up reflecting the complexity of the business models of multinational corporations. In practice most countries apply a hybrid of both territorial and worldwide tax system as this helps them curb the risks involved with each
Utilization of duty drawbacks According to research, refund of duties paid for imported good that is linked with the exportation under custom rules and regulations. It can be viewed as a duty drawback. By doing so, exporter might refund almost 99 percent of the duties paid on the imported product. The drawback is built in the basic when the assumed record is kept and other eligibility demands are satisfied. In addition, the drawback exists even if the exporter was not the original importer.
The transfer price chosen for management purposes does not simply duplicate the transfer price chosen in a tax‐free world. The differential between low‐tax and high‐tax countries where the involved business units are located shows an indirect influence on the choice of the incentive transfer price as the incentive transfer price will determine the size of business activity in the involved jurisdictions which themselves are taxed according to the tax‐only transfer price. Against this background it has been proposed that the optimal transfer price for business purposes will be “a weighted average of the pre‐tax marginal cost and the most favourable arm’s length
Usually, these charge are passed on to the consumer. 1.4.1 Sales Tax A sales tax is a tax paid to a governing body for the sales of certain goods and service. Usually laws allow or require the seller to collect funds for the tax from the consumer, it is usually called a use tax. Often laws provide for the exemption of certain goods or services from sales and use tax. 1.4.2 Central Sales Tax (CST)
Current cost accounting model seperates the profit that arises from holding assets. Under IFRS, fair values are commonly used to measure financial assets and liabilities of an organizations. But for the financial assets and liabilities, there is a mixed approach is considered that some items are measured at fair value while other elements are recognized at historical cost method. However, unrealized gains and unrealized losses that are recognized at fair value may or may not influence to the net
It is also related to the perceived justice of procedures and consequences of norm breaking. Wenzel (2003) found that there are various types of fairness, which is distributive justice, procedural justice and retributive justice, especially in the context of tax behaviour. Kirchler (2007) stated that, to define distributive justice, it majorly give importance on fair exchange of resources, benefits and costs, which is also equally important in horizontal, vertical and exchange fairness. Whereas, procedural justice give importance to the process of resource distribution. Leventhal (1980) found that, this justice are increasing when individuals accept the principle applied for the distribution of benefits and cost, as long as it is fair; and treatment by taxing person,as well as the person is friendly,respectful and supportive.Retributive justice is about the perceived fairness of norm-keeping measurement.