Limits, Transparency, and Board Independence Against Tax Avoidance

• Main Authors: Concepcion, Francis R., Laguinday, Cheri Mae R., Ong HiangHuy, Trisha Amber T.
• Format: text
• Published: Animo Repository 2018
• Subjects: Tax avoidance; Tax Collection; Taxation; Philippines; Tax Law
• Online Access: https://animorepository.dlsu.edu.ph/res_aki/140; https://animorepository.dlsu.edu.ph/context/res_aki/article/1126/viewcontent/aki_policy_brief_volume_vii_no._4.pdf
• Institution: De La Salle University

Taxes are levied by the government primarily for public service purposes (De Leon & De Leon, 2016).However, the high tax rates and narrow tax base imposed in the Philippines become burdensome for taxpayers and also decrease total government revenue collections (Diokno, 2008). It is shown in this study that foreign ownership and customer concentration both increase the levels of corporate tax avoidance practiced by firms while board independence decreases the same. Hence, we do not support the government’s plan to ease foreign ownership restrictions through the amendment of the Constitution (Romualdez, 2017) because easing the current restrictions may entail decreased government revenue. Additionally, we recommend that the International Accounting Standards Board (IASB) strengthen the enforcement of the International Financial Reporting Standards 8 (IFRS 8). In this case, increased transparency in disclosures is needed to help the government prevent the use of tax havens by major conglomerates. Lastly, we support the Securities and Exchange Commission’s (SEC) recommendation to have a certain minimum threshold on the proportion of independent directors in PSElisted firms on the basis that doing so will reduce levels of tax avoidance within these firms.