On the 16th September 2021, Assoc. Prof. Dr. Mohd Rizal Bin Palil from University Kebangsaan Malaysia and Prof. Nor Balkish Zakaria from Universiti Teknologi MARA Malaysia presented lectures regarding Research Trends in Taxation and Corporate Governance in the second webinar of the Webinar Series from the Accounting Department. Assoc. Prof. Dr. Mohd Rizal Bin Palil was the first to present and he explained how research in tax has become more interesting and important during the Covid-19 in particular. This is the best time to highlight that tax is an important instrument in developing an economy, and if anyone is doing research in relation to Covid-19, it can be counted as a contribution for the crisis, especially being in the Social Science discipline where we might not be able to contribute directly that much, so by doing research, we can illuminate the future generation about the current condition.
Assoc. Prof. Dr. Mohd Rizal Bin Palil elaborated about the current economic situation from the macro and micro perspective, where he took on example of what is currently happening in Malaysia, such as decrease in tax revenue, which is because of less household consumptions. Many Malaysians are actually very prudent in terms of spending right now and they believe the money needs to be saved so that it can be sustained longer because they are not able to predict the end of Covid-19. So in line with that less household consumption, according to macroeconomic theory, it negatively affects tax revenue. For business enterprises, there is an increase in overhead, because from an accounting perspective, we have fixed and variable costs, so in relation to those, they still have to pay their bills yet there is no sales and revenue. Due to this unfortunate reason, many enterprises face their downfall and are closed. All of these then affect the poverty aspect of the country. These parameters in macro and micro economic perspective need to be researched further.
He then proceeds to mention some of the recent research trends, such as corporate tax, where questions surrounding this topic are being asked, like “do we need to increase our corporate tax right now or do we need to decrease them instead? Malaysia currently has 24%, so should the government increase or decrease? And are they stimulating the economy by changing the tax rate? Or are they deterring the growth of the economy?” Secondly, there is individual tax. In line with his explanation before, he mentioned there are questions such as “would the people who pay individual tax decrease significantly because they are losing their income or facing salary cuts?” And so it raises another question, “is this individual tax system still effective during a pandemic?” Another interesting topic is about the zakat/islamic tax system because it is also questioned regarding the effectiveness of the system. Value added tax, tax relief and extension of the date of filling are also other topics that he mentioned. Other fundamental issues also include equity and fairness, efficiency, convenience and certainty. He also mentioned there are environment related issues, such as environmental taxes, green taxes, carbon taxes and petroleum taxes. These kinds of environmental taxes usually give more benefit, other than increasing tax collection, it also improves the environment condition.
Among the popular research about tax, Assoc. Prof. Dr. Mohd Rizal Bin Palil also mentioned that researchers in tax issues have the chance to study the behavioral dimension, to maybe discover about why people are willing to pay tax or unwilling to pay tax, the issues include tax compliance (voluntary or forced), tax audit, tax investigation and tax morale. He also suggested for researchers to do statistical research, such as comparing data (for example tax collection) before and after Covid-19, intra-country, inter-country, inter-continental statistics. He explained that the theories that might be used in the research include theory of planned behavior, equity theory, equilibrium theory and optimal tax theory.
Prof. Nor Balkish Zakaria proceeds the webinar with another interesting topic which is the effect of board monitoring operating cash flows manipulation among Malaysian firms, which is actually a research done by her. She firstly explained the board of directors play an essential internal control mechanism to monitor the management against manipulating financial figures. Appointing directors with the right credibility, independence and qualification is a precedent to maintain high financial reporting quality. The MCCG 2017 puts a great deal of emphasis on board gender composition and board tenure. The MCCG have recommended that at least half of the board must consist of independent directors and within the board. She quoted a research from Haldar & Raith (2017), which said that the internal governance mechanism can significantly improve financial disclosure. She mentioned that board independence, integrity, competency and meeting lead to better monitoring over earnings manipulation activities (Johari et al., 20019; Busirin et al., (2016). The MCGG 2017 also requires all public listed firms to employ and retain directors with the right skills, knowledge, and experience. Hence, the hypothesis proposed was “Firms with higher board monitoring have low earnings manipulation.”
She elaborated about the research methodology and mentioned that it was done in 2013. The research used a few sample selections with a final sample total 492. The time frame was from 2013 to 2017, it took a total of 5 years with 2, 460 firm year observations. In the data analysis, static panel analysis-fixed effects were used. The conclusion of the research was that there is a negative and significant relationship between the BOD index and the earnings management aligned with prior studies that found BOD can significantly improve the financial disclosure, reduce earnings manipulation, and limit real earnings management. Board size and board expertise have a positive and significant relationship on revenue manipulation-inverted U-Shape effect of board size and low number of board expertise among Malaysian firms. Board Independent has a negative and significant relationship on revenue manipulation. (BLQ)
