In praise of tax havens:International tax planning and foreign direct investment

Title : In praise of tax havens:International tax planning and foreign direct investment
Author(s) : Qing Hong, Michael Smart
European Economic Review 54(2010)82–95

The multinationalization of corporate investment in recent years has given rise to a
number of international tax avoidance schemes that may be eroding tax revenues in
industrialized countries, but which may also reduce tax burdens on mobile capital and
so facilitate investment.Both the welfare effects of and the optimal response to
international tax planning are therefore ambiguous. Evaluating these factors in a simple general equilibrium model, we find that citizens of high-tax countries benefit from some tax planning.Paradoxically,if tax rates are not too high, an increase in tax planning activity causes arise in optimal corporate tax rates, and a decline in multinational investment. Thus fears of a‘‘race to the bottom’’in corporate tax rates may be misplaced.

Tax risk management and the multinational enterprise

Title : Tax risk management and the multinational enterprise
Author(s) : Haroldene F.Wunder
Journal of International Accounting, Auditing and Taxation 18 (2009) 14–28

The financial scandals in theUnited States and other countries ushered in financial reporting and corporate governance reforms that extend beyond the U.S. Sarbanes-Oxley Act of 2002 (SOX). These initiatives have increased the international financial community’s awareness of the importance of risk management and internal controls. Tax risk management and related internal controls have been accorded less focus than risk management generally. The purpose of this research is to describe the current state of tax risk management of multinational enterprises (MNEs) by reporting survey responses fromchief financial officers (CFOs) of U.S. and non-U.S. MNEs. The research shows that significant progress has been madeby largeMNEsin developing andimplementing both general and tax risk management policies. The results provide guidance in identifying the loci and impact of organizational tax risk and indicate that respondents do not perceive alarming degrees of tax risk in their organizations. The study reveals a remarkable degree of similarity in U.S. and foreign firm responses and demonstrates, unexpectedly, that existing reporting structures enable CFOs to shift a significant degree of tax risk management to heads of tax.

Transfer Pricing Regulation In Indonesia: Some Thoughts For Reform

Author(s) : Kristian Agung Prasetyo, Bambang Widjajarso
JURNAL AKUNTANSI PEMERINTAH Vol. 3, No. 1, Oktober 2008 Hal 13-44

The twenty first century has witnessed an ever increasing rate of international trade as a result of globalisation and especially, the development of advanced information technologies. As a result, transfer pricing policy plays a significant role, particularly in many multinational enterprises (MNEs). The term transfer pricing itself refers to the pricing policies in relation to goods or services exchanged between related business units. As part of their domestic anti-avoidance provisions, most revenue authorities have transfer pricing regulations in place to prevent the price manipulation and profit shifting to avoid taxation. The Organisation for Economic Co-operation and Development (OECD) has been involved in setting out guidelines and principles in addressing transfer pricing issues, which have been adopted widely.
Like other countries, Indonesia is also faced with the ever increasing rate of global trade. However – unlike others – the Indonesian taxation authority does not seem to have adequate provisions to tackle international transfer pricing abuse. Even though the principles of related-party transactions regulations are set out in the income tax legislation (currently being amended), they are broad and simple in nature and are not accompanied by detailed and up-to-date guidelines for taxpayers and its field auditors.
This fact seems peculiar as companies are taxed progressively with the highest marginal rate of 30% (it has been proposed that it will be changed into a flat rate of 30%). In relation to this, concerns regarding the lack of transfer pricing guidelines have been raised by members of parliament involved in the amendment process.
This paper is intended to show that transfer pricing has become an important issue
worldwide and it is likely that it will stay that way. Consequently, it is crucial for Indonesia to have strong transfer pricing regulations, especially as the Indonesian taxation authority is responsible for more than 70% of total government expenditure. The OECD transfer pricing guidelines will be used as a point of reference along with its application in Australia. In the end, it is expected that this paper will:
1. Show the importance of international transfer pricing and present some basic principles necessary to address its abuse;
2. Demonstrate that the Indonesian taxation authority does not have an adequate arsenal to deal with transfer pricing issues. Some possible suggestions will also be presented based on the OECD guidelines and Australia’s experience.

Advanced Pricing Agreement Dalam Kaitannya Dengan Upaya Meminimalisasi Potential Tax Risk

Title : Advanced Pricing Agreement Dalam Kaitannya Dengan Upaya Meminimalisasi Potential Tax Risk
Author(s) : Mardiasmo
JURNAL AKUNTANSI PEMERINTAH Vol. 3, No. 1, Oktober 2008 Hal 1 – 12

Transfer pricing has been discussed as a serious problem in multinational company
business. It is not only related with the price determination among members of groups, but also includes the obligation on taxation. Transactions commited within members of multinational corporation involve cross border transaction. Thus, these transactions might create an opportunity to shift the tax burden from one country to another.
In such way, potential losses on national revenues from corporate tax might be existed. To overcome the problem, the government has attempted to minimize the potential tax risk by introducing an Advance Pricing Agreement (APA). The APA gives authority to tax officials to redetermine arm’s length prices over the transactions made among related parties. Therefore, there is certainty in assessing tax liability for each transaction made by groups of multinational company.
To what extent that the APA will be effective to minimize potential losses on revenue
collection, and what kind of risks that might be faced by the companies if they do not make any contract arrangement with the tax authority? To answer these questions, this paper tries to develop a tax planning with the study case on PT XYZ.

Auditing standards, increased accounting disclosure, and information asymmetry: Evidence from an emerging market

Title : Auditing standards, increased accounting disclosure, and information asymmetry: Evidence from an emerging market
Author(s) : Haiyan Zhou
Journal of Accounting and Public Policy 26 (2007) 584–620

We survey recent research in accounting anomalies and fundamental analysis.We use
forecasting of future earnings and returns as our organizing framework and suggest a
roadmap for research aiming to document the forecasting benefits of accounting
information.We combine this with opinions from the academic and practitioner
communities to critically evaluate key clusters of papers about accounting anomalies
and fundamental analysis disseminated over the last decade.Finally,we provide a new
analysis on how an ex ante and ex post treatment of risk and transaction costs affects the accrual and PEAD anomalies,and offer suggestions for future research.