2025-09-17
Arnaldo Purba, Alfred Tran
Prior studies indicate that there are two main channels used by multinational enterprises (MNEs) to shift profits from high-tax countries to low-tax countries: transfer pricing and debt financing. This study investigates profit shifting through these channels in Indonesia using Indonesian tax return data. The performances of foreign-owned Indonesian companies (FOICs), which are Indonesian affiliates of foreign MNEs, and domestic-owned Indonesian companies (DOICs) are compared in terms of earnings before interest and taxes scaled by total sales, and long-term debt to related parties scaled by total assets, in order to capture profit shifting using the transfer pricing and debt financing channels respectively. Propensity score matching and coarsened exact matching are used to match FOICs as the treatment group and DOICs as the control group. The results show that FOICs use both transfer pricing and debt financing to shift profits out of Indonesia.
2025-09-17
Maarten A. Siglé, Stephan Muehlbacher, Lisette E. C. J. M. van der Hel, Erich Kirchler
Society is digitising at a rapid pace and tax authorities must keep up with significant changes in how companies administer their tax liabilities. Tax auditors must be able to achieve an efficient and effective audit quality regardless of the degrees to which digitisation and digitalisation have been implemented by the audited companies. Previous research shows a positive correlation between audit experience and audit quality. However, it is unclear whether more experience—which was most likely acquired in traditional audits of accounting systems with low levels of digitalisation—is also beneficial in a changing environment with more highly digitalised companies. We argue that more experienced tax auditors are only superior to less experienced auditors in this changing environment if they are sufficiently willing and equipped to use new technologies and more digitised data. We expect—and find—that experienced tax auditors with adequate technology readiness achieve a higher audit quality in detecting information technology (IT) risks than tax auditors with less experience and/or less technology readiness. Our results, however, also show that more experienced tax auditors do not perform better when detecting traditional risks (i.e. non-IT-related risks) than less experienced auditors. Overall, our results suggest that experience without the propensity to embrace and use new technologies and more digitised data might not be enough to achieve the required audit quality levels in the future. We therefore emphasise the importance of appropriate training (in order to adopt new ways of working and acquire competencies to understand new technologies) and the strategic composition of the tax authorities’ audit teams.
2025-09-17
Shelley Griffiths, Matthew Handford
This paper provides a perspective on the phenomenon of tax exceptionalism in New Zealand administrative law. Tax exceptionalism is broadly defined as the perception that tax law is so different or special when compared to other areas of law that relevant developments in other areas of the law are not applied or applied inconsistently. However, there has not yet, to our knowledge, been any investigation into tax exceptionalism in New Zealand. This article aims to fill this gap. First, it argues that tax exceptionalism is evident in the New Zealand Supreme Court’s judicial review judgment in Tannadyce v Commissioner of Inland Revenue ( Tannadyce ) and, in particular, the Supreme Court’s approach to privative clauses. It then argues that New Zealand’s particular brand of tax exceptionalism represents a concerning departure from its constitutional norms and this cannot be justified by public policy. In doing so, the article not only sheds light on something that has not received attention in New Zealand, but further contributes to the broader international understanding of the phenomenon while recognising that the precise manifestation of the phenomenon is a reflection of the particular environment in which it occurs.
2025-09-17
Grahame Jackson
In this article, the author seeks to establish a functioning, non-context-specific definition of an “unequal treaty” that takes into account underlying principles of state equality, the concept of treaties, and non-coercion, whilst sitting outside of any single historical moment, by reference to international customary law, the United Nations (UNs)’ resolutions of the General Assembly, and normative or moral concepts of coercion. Having established a definition, the author goes on to apply that definition to a number of developments and provisions that were put in place in the last decade, such as the Foreign Account Tax Compliance Act (FATCA), the Common Reporting Standard (CRS) and the outflows of the Organisation for Economic Co-operation and Development (OECD)’s Base Erosion and Profit Shifting (BEPS) project, setting these provisions within their political and procedural contexts so as to place them within the historical tradition of treaties between large and small powers. By applying this definition, the author concludes that some, but not all, of the recent tax-related provisions amount to “unequal treaties”. In establishing a methodology with which to assess the inequality of treaties and applying that to the current tax relevant provisions, the author hopes to allow an informed discussion based not only on the objectives of large powers but also on an assessment of the characteristics of the methods by which the community of developed nations, as represented by the OECD, achieves its goals in the tax context.