An Analysis of Tax Incentives in the FDI Decision Process from Organisational Structural Perspectives: Evidence from UK Multinationals

This paper investigates the role of tax incentives in the FDI decision making process in a sample of UK multinational companies. The paper considers the relative importance of stages and determinants in the FDI decision making process. The determining factors in FDI decision process are examined from the organisational structure perspectives –FDI ownership form and market entry mode. The paper specifically identifies the role of tax in the strategic decisions of FDI organisational structure, as well as the stages of FDI decision making process. Relatively few prior empirical studies have examined the interface between tax strategy and corporate strategy in the context of FDI organisational structure and decision making process. This paper therefore attempts to examine the tax incentives for FDI decision process from the perspectives of the organisational structure

Governance disclosure quality and market valuation of firms

This study develops a ‘comply or explain’ index which captures compliance and quality of explanations given for non-compliance with the corporate governance codes in UK and Germany. In particular, we explain, how compliance and quality of explanations provided in non-compliance disclosures, and various other internal corporate governance mechanisms, affect the market valuation of firms in the two countries. A dynamic generalised method of moments (GMM) estimator is employed as the research technique for our analysis, which enabled us to control for the potential effects of endogeneity in our models. The findings of our content analysis suggest that firms exhibit significant differences in compliance, board independence and ownership structure in both countries. The ‘comply or explain’ index is positively associated with the market valuation of UK firms suggesting that compliance and quality governance disclosure is value relevant in the UK. Institutional blockholders’ ownership is however, negatively associated with the market value of firms, which raises questions about the monitoring role of institutional shareholders in both countries. We argue that both compliance and explanations given for non-compliance are equally important, as long as valid reasons and justifications for non-compliance are provided by the reporting companies. These findings thus imply that the ‘comply or explain’ principle is working well and that UK and German companies could benefit from the flexibility offered by this principle. With respect to the role of board size, board independence, ownership structure, and institutional ownership of firms, this study offers policy implications

Transfer priing and economic functions analysis: the Japanese paradigm

This paper examines the difficulties facing tax authorities in valuing cross-border flows from a transactions based analysis, in conditions where intangibles and services are important and where the multinational firm concerned is operating a system in which group-wide economic functions dominate decision making. Its key contention is that the economic functions of any entity should be examined in order to determine whether transactions analysis can be used to produce an acceptable value. This is done in the particular context of Japanese multinational enterprises and uses two hypothetical situations to demonstrate the inadequacy of transactions based analysis as a panacea for transfer pricing problems, especially for transfers of value involving intangibles and services, which it redefines into two categories, perceptible and imperceptible

Mapping Tax Strategies in the FDI Decision Process

This study proposes a framework for mapping tax strategies in the developmental and sequential FDI decision process. The authors examined the relative importance of the stages of the FDI decision process with and without tax considerations for a sample of 192 UK MNEs. The stages of identifying investment opportunity, and the FDI legal and management structures are found to be important to the decision process when tax effects are considered. The findings suggest that availability of foreign partners is an important factor to the ownership and entry mode decisions. A favourable tax regime does not distort international organisational structure. Tax is considered both before and after the strategic decisions are made

Is the HMRC Charter Fit for Purpose? Experiences of Tax Practitioners and Vulnerable Citizens

Interactions with His Majesty’s Revenue & Customs (HMRC) should accord with the principles outlined in HMRC’s 2023 Charter, e.g. “Getting things right”; “Making things easy”; “Being responsive”; “Treating you fairly”; “Being aware of your personal situation”; and “Recognising that someone can represent you”. These principles should ensure taxpayers are treated in alignment with democratic tax principles, such as equity. Some taxpayers are represented in their dealings with HMRC, but others are not (e.g. vulnerable people and low-income earners), and must interact directly with HMRC or seek help from a tax charity. Using three empirical studies we investigate the experiences of individuals using HMRC services, namely small tax practitioners and two vulnerable groups of people, specifically tax credit claimants and older individuals with low-income levels. We analyse these groups’ interactions with HMRC in terms of the above Charter principles. We highlight the unintended consequences and impact of digitalisation of tax administration, particularly for disadvantaged citizens. We offer recommendations to improve tax administration, policy and practice, better aligning them with democratic tax principles

Reliability of the audit committee in weak institutional environments: Evidence from Nigeria

Relying on institutional theory, this article presents external stakeholders’ perspectives on the factors that influence audit committees’ independence and reliability in a weak institutional context. We conducted 37 semi-structured interviews with two critical external stakeholder groups (27 experienced professional investors and 10 senior regulatory officials) in the Nigerian banking sector. Our study finds that the independence of audit committee members, being an ‘a posteriori’ rather than an ‘a priori’ accountability verification, bears institutional contextual bias. Consequently, we unpack five factors (allegiance to the dominant owner; poor professional conduct; corruption; nepotism and opportunism; and impunity) that influence external stakeholders’ perception of the reliability of the audit committee’s independence in Nigeria

Reliability of the audit committee in weak institutional environments: Evidence from Nigeria

Relying on institutional theory, this article presents external stakeholders’ perspectives on the factors that influence audit committees’ independence and reliability in a weak institutional context. We conducted 37 semi-structured interviews with two critical external stakeholder groups (27 experienced professional investors and 10 senior regulatory officials) in the Nigerian banking sector. Our study finds that the independence of audit committee members, being an ‘a posteriori’ rather than an ‘a priori’ accountability verification, bears institutional contextual bias. Consequently, we unpack five factors (allegiance to the dominant owner; poor professional conduct; corruption; nepotism and opportunism; and impunity) that influence external stakeholders’ perception of the reliability of the audit committee’s independence in Nigeria