• Version
• Download 11
• File Size 1.87 MB
• File Count 1
• Create Date 5 六月, 2015
• Last Updated 11 三月, 2021

Divergence in Effective Tax Rates: Evidence in Malaysian Listed Firms

This paper examines whether Malaysian firms are complying with income tax laws and paying appropriate income taxes. The study explores the divergence in effective tax rates (ETRs) among firms listed on the stock exchange referred to as the Bursa Saham Malaysia (also known as the Malaysian Stock Exchange). We used Compustat data for the eight years from 2005 to 2012 (inclusive). Our initial search produced 8,117 firm-year observations. After data cleaning, our sample consisted of 752 observations, each observation representing a firm’s eight-year average ETR. ETR is measured by dividing income tax expense by profit before tax (PBT). The results of this study prove that during the period 2005 to 2012 (inclusive), more than half of the firms had an ETR either below 20 per cent or above 30 per cent, which represents a significant variation from the statutory tax rate of 25 per cent. Policy setters should specifically focus on type of industry and size and tax practitioners should focus on the tax planning gaps among the sectors listed.