Components of Tax Planning and Characteristics of Top Management Team

Nor Shaipah Abdul Wahab

Abstract


ABSTRACT

Tax planning activities can be detrimental to the welfare of a country’s nations. Firms’ tax planning strategies can be classified according to the activities’ components, i.e. permanent, temporary and statutory tax rates differences. Upper echelons theory explains top management team (TMT) as corporate elite whose decisions can be predicted through its members’ cognitive, value and perceptions. This study therefore attempts to examine the extent the characteristics of TMT members, in terms of age, tenure, education and gender, can explain tax planning strategies, consisting permanent, temporary and statutory tax rates differences. The sample is 216 Malaysian listed firms from 2008 to 2015. This study finds that tenure and education explain tax planning and permanent differences negatively. In contrast, tenure affects statutory tax rates differences positively. This study contributes to literature and practice by providing further evidence to support upper echelons theory in explaining the influence of TMT on tax strategies. This study also provides new evidence of tax strategies from a governance perspective. The findings suggest to the tax authority that TMT characteristics are additional factors to be considered in tax audit framework. The study also contributes to public by highlighting that TMT characteristics are useful to predict tax planning strategies.

Keywords: Tax planning; permanent differences; temporary differences; statutory tax rates differences; top management team

ABSTRAK

Aktiviti perancangan cukai memberi kesan negatif kepada masyarakat sesebuah negara. Perancangan cukai korporat boleh diklasifikasikan mengikut komponen aktiviti tersebut iaitu perbezaan kekal, perbezaan sementara dan perbezaan kadar cukai berkanun. Teori upper echelons menerangkan bahawa pasukan pengurusan atasan (PPA) adalah elit korporat dan keputusan dibuat PPA boleh dijangka berdasarkan kognitif, nilai and persepsi ahli-ahli PPA. Justeru, kajian ini dilaksanakan untuk mengkaji sejauh mana ciri-ciri ahli PPA, iaitu umur, tempoh perkhidmatan, tahap pengajian dan jantina, dapat menerangkan strategi perancangan cukai yang terdiri daripada perbezaan kekal, perbezaan sementara dan perbezaan kadar cukai berkanun. Sampel kajian ini ialah 216 buah syarikat Malaysia yang tersenarai dari 2008 sehingga 2015. Dapatan kajian ini menunjukkan bahawa tempoh perkhidmatan dan tahap pengajian menerangkan perancangan cukai dan perbezaan kekal secara negatif. Walau bagaimanapun, tempoh perkhidmatan memberi kesan positif ke atas perbezaan kadar cukai berkanun. Kajian ini menyumbang kepada literatur dan praktikal melalui bukti yang menyokong teori upper echelons dalam menerangkan pengaruh PPA ke atas strategi cukai. Kajian ini juga mengetengahkan bukti baharu tentang strategi cukai daripada perspektif tadbir urus. Hasil kajian ini turut mencadangkan kepada pihak berkuasa percukaian bahawa ciri-ciri PPA adalah faktor tambahan yang perlu dipertimbangkan dalam rangka audit cukai. Kajian ini juga menyumbang kepada umum dengan menjelaskan bahawa ciri-ciri PPA adalah penting untuk menjangka strategi perancangan cukai syarikat.

Kata kunci: Perancangan cukai; perbezaan kekal; perbezaan sementara; perbezaan kadar cukai berkanun; pasukan pengurusan atasan


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