Comparative Experiences and Multidisciplinary Approaches: Accounting Law Perspective Kerrie Sadiq
• Institutional Framework: – Disclosure regimes under which financial reporting requirements are set. – Requirements vary depending on the type of entity and the level of public interest in the entity. Accounting, • Accounting: The accounting Auditing, and standards (IFRS, AASB, GAAP) Accountability • Auditing: independent opinion to the shareholders on the truth and fairness of the financial statements • Accountability (Transparency): sources of information used by investors, analysts, creditors and the entities themselves
Understanding the Implementation of Tax Standards through Accounting Research ACCOUNTING MEASURES ACCOUNTING AS A TYPE OF ACCOUNTING RESEARCH, TAXATION AND MAKES VISIBLE RESEARCH EXAMINES RESEARCH EXAMINES CERTAIN ECONOMIC HOW ACCOUNTING IS TAXATION-RELATED ISSUES EVENTS. USED BY INDIVIDUALS, SUCH AS MARKET REACTIONS ORGANIZATIONS AND TO TAX DISCLOSURES AND GOVERNMENT AS WELL TAXPAYER DECISION MAKING AND THE RELATIONSHIP AS THE CONSEQUENCES BETWEEN ACCOUNTING THAT THESE PRACTICES INFORMATION AND TAX HAVE. AUTHORITIES.
What does Accounting Research have to do with Legal Transplants? It’s about the That is, we can look at the data on ‘law in action’: data! • Archival data • Evaluative data • Qualitative • Statistical data • Quantitative • Surveys on perceptions • Data on the quality of laws/standards
Case Study #1 Sadiq, Kerrie, Sawyer, Adrian & McCredie, Bronwyn (forthcoming) “Jurisdictional responses to base erosion and profit shifting: a study of 19 key domestic tax systems” eJournal of Tax Research • The objective of this study is to consider the implementation of both G20/OECD BEPS initiatives and unilateral reforms in 19 jurisdictions. • A qualitative approach is undertaken in this study alongside an overarching interdisciplinary socio-legal and accounting-transparency position. This position involves an analysis of theoretical, legal and policy concepts within both a social and current legal and accounting context. The research questions are addressed within the legal and accounting frameworks using current policy discussions to assess domestic developments of the OECD’s global BEPS recommendations.
Objective… To consider the implementation of both G20/OECD BEPS initiatives and unilateral reforms in 19 countries to advance the knowledge of the profession and the global community. To this end, the following countries are included in this study/preliminary survey: Australia New Zealand Canada Nigeria China Philippines Hong Kong Singapore India South Africa Indonesia Thailand Japan the United Kingdom Korea The United States Malaysia Vietnam The Netherlands
Countries do • according to the level of not operate in involvement in global tax similar policies; political, • the sophistication in their social and ability to implement global economic recommendations; and climates and • the degree of base erosion as such each and profit shifting at a Preliminary country domestic level. varies: Results – Descriptive We therefore Data investigate • OECD member status; and analyse • G20 member status; the economic, • region; political and • level of development; social aspects • financial complexity; and of each • import versus export status of relevant each country. jurisdiction by discussing:
Preliminary Results – Descriptive Data 1. OECD member status • The OECD is a key player in the development of the base erosion and profit shifting (BEPS) program • OECD is made up of 35 countries and five key partners • Biggest criticism of the OECD is its lack of inclusion of developing nations due to the narrowness of its membership • OECD members represent: – 63% of world economy – 75% of world trade – over 50% of world energy consumption – but only 18% of world population • Surveyed countries: – eight (42%) OECD Member countries, – eleven (58%) non-Member countries, four (21%) are OECD Key Partner countries
Preliminary Results – Descriptive Data 2. G20 member status • G20 membership is much broader and inclusive: China, India, Indonesia, and South Africa are members • Surveyed countries: – ten (52%) G20 Member countries, – nine (47%) non- Member countries
Preliminary Results – Descriptive Data 5. Financial complexity • Measured using TMF Group Financial Complexity Index (2017) – Parameters: compliance, reporting, bookkeeping and tax – 1 = highest level of complexity, 94 = lowest • Surveyed countries: – Vietnam most complex (5), Hong Kong least complex (91) – Developing countries have a greater financial complexity (average 39/94) than developed jurisdictions (67/94). This is statistically significant (t-stat 2.30, p-value 0.03).
Case Study #1 Engagement with Action 13 Concern expressed Existing legislation / commitment Action 13 deemed sufficient Actions taken Actions in progress given No action Total 0 14 3 0 2 Developed 0 7 0 0 0 Developing 0 7 3 0 2 Engagement with Action 14 Concern expressed Existing legislation / commitment Action 14 deemed sufficient Actions taken Actions in progress given No action Total 1 5 5 6 2 Developed 0 4 3 0 0 Developing 1 1 2 6 2
Case Study #1
• To quantify and compare overall jurisdictional response to these actions and measures, a rank score was determined based on the level of engagement. A score of 4 was given for each action/measure where the jurisdiction’s existing legislation was deemed sufficient. A Case Study score of 3 was given where #1 jurisdictions had taken action, 2 where actions were in progress, 1 where commitment was given or concern expressed and 0 if no action was undertaken at all. The results of this ranking exercise are reported as follows:
Case Study #1
Case Study #2 McCredie, B and Sadiq, K “Is Transparency the New Politics of Tax and Corporate Social Responsibility?” The use of To determine whether Leximancer, a data corporate attitudes These representations analysis and mapping towards tax are were in response to software that changing, four distinct Australian automates the coding domestic tax reform representations about of document text, the corporate entity by measures instituted delineates concepts, and identifies themes, a variety of during and subsequent stakeholders and to the Australian is well-suited to the through numerous Government Senate nature and size of the channels were Inquiry into corporate data employed and tax avoidance. ensures the validity analysed using Leximancer software. and reliability of the results.
Theoretical basis 1. Artificial entity view The corporation is an extension of the State and, as such, simply paying tax fulfils the corporation’s CSR obligations to the State 2. Aggregate view The corporation as the sum of its shareholders and CSR activities are considered excessive as they do not maximise profits and value for those shareholders. 3. Real entity view The corporation is an individual, which is a separate entity from both State and shareholders, and has a legal responsibility to pay taxes and the social conscience to not engage in overly- aggressive tax planning to minimise its tax obligation. (CSR becoming 4 dimensions: ESGT)
• In response to domestic tax reform measures, corporates are transitioning from an Hypothesis ‘aggregate’ to a ‘real entity’ view, instituting tax as an additional dimension of CSR.
• Examine the impact of domestic tax reform actions (direct and indirect) on corporate attitudes • Corporate attitudes are evidenced by representations about the corporate entity by: – a variety of Individuals: Data and CEO’s, management, public relations etc. methodology – via numerous channels e.g. company disclosures, reports and public appearances • Tax reform measures are identified based on an Australian case study
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