| The idea of tax avoidance is considered as old as taxation itself.Organizations and individuals are always on the lookout for loopholes in the complexities of the existing tax system to exploit it in order to reduce their tax expense.By definition,tax avoidance is a term used to refer to all activities adopted by individuals or organizations,regarded acceptable within the legal framework,in order to earn a tax benefit.The original motive for such practices is to reduce expenses,thereby increasing profitability.With Tax avoidance being traditionally viewed as enhancing firm profitability,it is thus considered as being in the interest of the owners of the firm.In extant literature however,this view has greatly been questioned by researchers.Among most researches about the existing relationship between corporate tax avoidance and corporate financial performance or corporate value,researchers found that corporate tax avoidance did not translate to the intended benefits mostly due to agency problems,which arises due to the corporate governance system in place.Corporate governance is broad,covering all the systems,rules,practices and procedures within a firm which directs and controls a firm and balances the interests of various stakeholders of the firm.It is also the framework by which a firm attains its objectives.The board of directors is the primary stakeholder that influences corporate governance,as it sets the tone at the top trickling down its effects on how the entire firm runs,thus it being the mechanism for measuring the corporate governance of a firm in this study.Taking data from the financial statements and annual reports of firms listed on the Ghana Stock Exchange(GSE),the existing relationship between corporate governance and corporate tax avoidance as well as the relationship between corporate tax avoidance and corporate financial performance was empirically tested employing standard ordinary regression models.The data from 104 firm year observations were collected by analyzing and hand collecting vital information from the financial statement and annual reports of the firms published on the GSE's Annual Report Ghana report and firms' websites and used for both analyses of this study.The SPSS statistical software tools were employed in the analyses of the data collected and testing of hypotheses.In the first analysis testing the relationship existing between the specific board characteristics and corporate tax avoidance,the results showed a significantly positive relationship between the board's affiliation and the firm's corporate tax avoidance measure(the Effective Tax Rate),indicating the negative relationship between board affiliation and corporate tax avoidance behaviors in the firm.Also,the results showed a negative relationship between board expertise and ETR,indication of the positive relationship existing between the expertise of the board in the field of taxation and the firm's engagement in corporate tax avoidance behaviors.Although from the observations most of the boards were independent,influence of the independence of the board on the tax avoidance behaviors of the firm was not found to be significant in the analyses.In the second analysis testing the relationship between corporate tax avoidance and corporate financial performance,the results showed a significant negative relationship between the measure of profitability(ROA)and the measures of Corporate Tax Avoidance(ETR 1,ETR 2).Since a low ETR is an indication of a higher corporate tax avoidance within a firm,the findings imply that corporate tax avoidance in fact does translate to profitability and value.In conclusion,corporate tax avoidance,with empirical reference based on firms listed on the GSE,translates to profitability or value maximization as was intended when the firm has to its advantage a balance of expertise and professionalism by those entrusted in the hem of affairs of the firm,that is,the management. |
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