Abstract

This paper calculates two tax avoidance measures from Desai and Dharmapala(2006) model using real taxable income or estimated taxable income obtained from taxes currently payable and then tests the homogeneity of the two tax avoidance measures and the homogeneity of those by firm size or by industry. For the test of homogeneity, this paper uses parametric statistical tests, i.e. paired t－test and ANOVA, and nonparametric statistical tests, i.e. Wilcoxon test and Kruskal－Wallis test. In addition, this paper uses regression to find firm characteristic variables having relation to the difference of the tax avoidance measures by firm size or by industry. Sample firms are 283 listed manufacturing firms in KIS－Value and the final sample observations are 1,117 firm－years. The data for analysis is 2004－2007 years. Conclusions are summarized as follows. First, the tax avoidance measure calculated from estimated taxable income is significantly different from the tax avoidance measure calculated from real taxable income. So, I suggest to calculate estimated taxable income from taxes currently payable plus tax credits and exemptions. Second, the tax avoidance measures are different by firm size or by industry. Firm characteristic variables having relation to the difference of the tax avoidance measures by firm size or by industry are debt－to－asset ratio, return on assets, weight of expert, foreign investor ownership. This paper is valuable in that it reveals the validity of the tax avoidance measure calculated from estimated taxable income and provides tax avoidance informations related to firm size and industry.

Keywords

• Tax Avoidance
• Desai and Dharmapala(2006) Model
• Estimated Taxable Income
• Firm Size
• Industry

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