Corporate Tax Avoidance of Malaysian Public Listed Companies: A Multi-Measure Analysis

Abstract

Objective - Even with corporate tax avoidance being extensively studied, it is still lacking a single universal measurement. There is also a dearth of studies focusing on developing economies such as Malaysia. This study, therefore, analyses the correlations between effective tax rates (ETRs) and book-tax differences (BTDs), which are the most commonly used measures of corporate tax avoidance on Malaysian listed companies for ten years. Methodology/Technique - This study performs distribution, frequency, and correlation analyses on the ETRs and BTDs of the Top 300 companies listed in the Main Market of Bursa Malaysia based on market capitalization. The data used spans a ten-year period from 2010 to 2019. Findings - The results of the distribution, frequency, and correlation analyses show that both these measures are closely related gauges of corporate tax avoidance. Novelty - The results of this study provide further statistical proof that ETR and BTD measures of corporate tax avoidance are closely related. Its utilization of data from listed companies in Malaysia expands the current body of literature by addressing corporate tax avoidance practice in a developing economy. By concentrating on both ETR and BTD measures, this study's analysis is consistent with the broad continuum of corporate tax avoidance spectrum and significantly reduces the risk of warping its determination of tax avoidance level. Type of Paper - Empirical. Keywords: Cash ETR; corporate tax avoidance; GAAP ETR; permanent BDT; total BTD. JEL Classification: G30, H25, H26, M40. URI: http://gatrenterprise.com/GATRJournals/AFR/vol6.1_1.html DOI: https://doi.org/10.35609/afr.2021.6.1(1) Pages 44 – 53