Tax Disclosures in Financial and CSR Reporting as a Deterrence for Evasion

Abstract

This chapter is about the mandatory disclosure of income tax as required by international financial reporting standards (IFRS) and standards issued by Portuguese regulatory bodies. The chapter also elaborates the most relevant disclosures from the perspective of corporate social responsibility (CSR). Furthermore, it highlights the most influential CSR reporting standards to answer the question that whether these standards adequately address the issue of income tax payment as a factor of CSR. Finally, it also reviews the international and Portuguese theoretical and empirical academic research available about income taxes and related subjects, such as disclosures, corporate tax as a CSR matter, and tax aggressiveness of corporations. Future research may be conducted geographical reporting of income tax expense and its relationship with the effective tax rate (ETR) and other independent variables.

Is Tax Accounting Information Relevant to Users? The Case of Indonesia

“…It is possible to recognize the tax items using a realizable value or the amount that a company is expected to pay, so if there is any uncertainty about the tax treatment, the company can show it properly in its financial statements (Poli, 2015). Previous research has also shown that a lack of specific guidance in tax accounting can create confusion for taxpayers since they are uncertain whether they should follow the accounting rules or the tax rules (Ahalik, 2021;Albuquerque & Neves, 2021;Oliveras And & Puig, 2005). Therefore, it would be advisable to create separate guidance for tax accounting information that clearly describes the accounting standards' requirements and tax code requirements regarding the presentation of the items and shows how companies can record their transactions while fulfilling both requirements (Ahmeti, Aliu, Elshani, & Ahmeti, 2014;Bergner & Heckemeyer, 2017).…”

“…These three accounting standards mainly focus on aspects of income tax; however, although income tax constitutes the main tax in almost all jurisdictions, several other taxes contribute significantly to companies' financial statements, such as value added tax, withholding taxes, and local taxes. All taxes other than income tax are considered relatively straightforward; therefore, it is deemed to be unnecessary to have specific accounting standards for them (Albuquerque & Neves, 2021). Nevertheless, tax cases and problems can be significant in areas other than income tax.…”

“…The Global Reporting Initiative (GRI), the standard-setter for sustainability reporting, published the GRI standards regulating tax disclosure, which focus more on how well a company manages its tax and mitigates any risks associated with tax (Holle, Kockrow, & Schnitger, 2021). Several previous researchers have also shown that tax is an integral part of a business and should be explained with integrated thinking; that is, it must be linked with the relevant business processes, how it affects business performance, and how tax laws are expected to affect the company's business processes in the future (Albuquerque & Neves, 2021;Venter et al, 2017). Indonesia has not implemented sustainability reporting to its full extent, and tax disclosures about tax management and risk are still at a low level (Andriadi & Werastuti, 2022).…”