The Relationship of Tax Avoidance with Cash Holdings and Debt Policy

• Main Authors: HUNG, WEN-LING, 洪文玲
• Other Authors: MA, CHIA-YING
• Format: Others
• Language: zh-TW
• Published: 2019
• Online Access: http://ndltd.ncl.edu.tw/handle/wazcjb

碩士 === 東吳大學 === 會計學系 === 107 === The tax payable is an important cost and expense for corporate and shareholders, and affects the future use of cash and the important financing decisions of liabilities in operations. Tax avoidance can save tax, but excessive tax avoidance will attract the attention of the tax authorities. While the internationalization of Taiwans economy, the development of various fields and economies has led to a more sophisticated tax avoidance plan, the result that the tax collector and taxpayer both sides oppose each other. The first research topic of this study is the correlation between tax avoidance and cash holdings. Empirical results support the agency theory. In the view of agency theory, tax avoidance could have an adverse impact on firm’s information environment. Therefore, the adverse impact of tax avoidance can allow managers to undertake greater rent extraction. Companies with a higher degree of tax evasion have less cash holdings. The second research topic of this paper is the correlation between tax avoidance and debt level. Many companies in Taiwans listed cabinets have cash at hand, but they still maintain debts in order to use borrowing to obtain more profitable investments. Companies with a higher degree of tax evasion have higher debt levels. The third study in this paper explores whether the anti-thin capitalization rules of Article 43 of the new law on income tax act law can effectively curb internal debt financing and reduce interest expenses. The empirical results show that although the interest expense ratio is lower than before the implementation, it is not significant. The reason for exploring the reason may be that the liability of the related person occupies the owners equity. If it exceeds three times, the excess interest expense shall not be included as a fee or loss. This value may be too high, which may not be effective. Keywords：Tax avoidance、Cash holding、Debt levels、Anti-thin Capitalization Rules