The Tax Compliance Costs of Large Corporations: An Empirical Inquiry and Comparative Analysis

Chris Evans (), Philip Lignier and Binh Tran-Nam
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Chris Evans: School of Taxation and Business Law, University of New South Wales, Australia and Department of Taxation, University of Pretoria
Philip Lignier: Tasmanian School of Business and Economics, University of Tasmania
Binh Tran-Nam: School of Taxation and Business Law, University of New South Wales, Australia and RMIT Asia Graduate Centre, RMIT University, Vietnam

Canadian Tax Journal, 2016, vol. 64, issue 4, 751-793

Abstract: This article considers the tax compliance costs incurred by the large corporate sector. Using a survey of large and very large businesses and international groups in Australia, and drawing on the findings of other studies, the authors compare and contrast the current burden with the burden encountered by such businesses in Australia and elsewhere in recent years. They identify key trends in the compliance cost profile of the large corporate sector and possible explanations for those trends. They also discuss the factors that are perceived by survey respondents to give rise to high compliance costs. Finally, they provide insights into the relationship between the tax-risk positions taken by Australian firms in the large corporate sector and the compliance cost profiles of those firms. The research outcomes are both confirmatory and insightful. They confirm key findings from the literature that tax compliance costs are significant, regressive, and not reducing over time, but also provide new insights into the compliance cost profile of the large corporate sector--an area of research that has previously been largely unexplored. The research suggests that, apart from business size, the number of taxes that the entity has to comply with is a significant predictor of the level of tax compliance costs. In addition, it suggests that, after controlling for size, entities that have been identified as a significant compliance risk by the tax authority have higher compliance costs than those with lower risk classifications. Besides these statistically measurable determinants, the study suggests that three broad drivers of tax compliance costs are perceived by taxpayers: the complexity and uncertainty of tax rules, the administrative compliance requirements imposed by tax authorities, and international exposure.

Keywords: Tax; tax administration; operating costs; large corporations tax; risk management; compliance (search for similar items in EconPapers)
Date: 2016
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