Corporate tax risk: a literature review and future research directions

Abstract

Our study aims to analyze the current state of, and avenues for, future studies into the tax risk literature. The construct of the corporate tax risk (tax uncertainty) has increasingly begun to attract significant interest from both academics and practitioners. Most previous studies discussing corporate tax behavior have also focused on tax planning, tax avoidance, and tax evasion. Studies investigating the tax risk are still very limited and it is an underexplored subject. Examining the tax risk is crucial because it relates to the tax outcomes arising from a firm's taxation activities. Furthermore, analyzing the tax risk simultaneously with other tax behavior constructs may provide a deeper understanding. Despite the importance of the tax risk construct, there is no published literature review regarding the tax risk. Using a systematic review process, this study selected 37 articles published in 21 highly reputable journals listed in the Scopus database. The findings of this study are provided in two sections: (1) A discussion of the current studies of tax risk, including the theories, methods, and measurements of tax risk, its determinants and consequences; and (2) Recommendations for future research agendas. From the review, we find that tax risk research still tends to be limited and understudied; many relevant research gaps can be identified. Finally, we suggest several research directions into 12 themes: corporate governance, executive personal characteristics, executive compensation plans, ownership structure, firm-level characteristics, the external market, institutional factor, accounting and auditing, operating environment, regulators and regulation, reputational costs, and others.

The impact of managerial ability on corporate tax risk and long-run tax avoidance: empirical evidence from a developing country

“…Policymakers can require minimum disclosures about unrecognized tax benefits in a company's annual report. In the USA, for example, firms have been required to submit reports on unrecognized tax benefits (Saragih and Ali, 2021). Adequate disclosure of unrecognized tax benefits in the annual report is expected to prevent companies from engaging in illegal tax savings practices that expose them to certain tax risks.…”

“…In addition, future Notes: a Robust standard error is used due to the nonnormality and heteroscedasticity of residuals; b Panel regression using the fixed effect method; Ã , ÃÃ and ÃÃÃ represent significance at levels 0.10, 0.05 and 0.01 research can replicate this study using the same or a similar basic research model, but with moderating or mediating variables added. The expansion of the corporate tax behaviours research model route will contribute to theory, literature and practice in a relatively new way (Saragih and Ali, 2021). Re-examination will be useful for synthesizing, combining and expanding knowledge of specific phenomena (Block et al, 2022), which will ultimately help to place academic discussions on a solid foundation because it is supported by a variety of empirical evidence (Block and Kuckertz, 2018).…”

“…However, there is limited empirical evidence that links the role of managerial ability with corporate tax behaviours in terms of tax risk and tax avoidance simultaneously (Anggraini and Sholihin, 2021; Saragih and Ali, 2021). Several empirical studies specifically investigate such a relationship, for example, Koester et al (2016), Park et al (2016), Huang et al (2017), Akbari et al (2018) and Khurana et al (2018).…”

The role of XBRL adoption on the association between managerial ability and corporate tax outcomes: empirical evidence from Indonesia

“…Whereas most recent research focuses on the direct impact of XBRL adoption, our study is among the first to propose and test an explanation for the moderating role of XBRL adoption on the association between managerial ability and corporate tax avoidance and tax risk. Finally, this study Empirical evidence from Indonesia responds to Saragih and Ali (2021) who suggested examining the impact of XBRL on tax avoidance and tax risk in non-US countries.…”

Nexus of Tax Avoidance and Firm Value in Pakistan: Moderating Role of Board Independence

“…The relationship between CTA and FV has been studied in the literature from the perspective of developed countries, but it is an under-researched issue from the perspective of developing countries (Saragih & Ali, 2021). Furthermore, the inconclusive results in the literature provide the opportunity to further investigate the association (Salihu & Kawi, 2021).…”