Fusion Investment Fund 2015: The impact of tax avoidance on company value.

We are very pleased to announce that we are receiving funding from the Fusion Investment Fund for a project to examine the impact of tax planning activity or ‘tax avoidance schemes’ on the market value of listed UK companies.  The aim is to extend the UK research that has commenced in the Accounting, Finance and Economics Department through comparative studies in Italy and Germany by collaborating with tax accounting researchers in those countries. 

Tax avoidance has been recognised as a major problem by the G8 Nations and the OECD with the publication of the Base Erosion and Profit Shifting (BEPS) Action Plan in 2013.  In the UK the government has objected to so-called ‘aggressive tax avoidance’ schemes that are technically legal but have arguably little or no commercial substance and the General Anti-Abuse Rule (GAAR) was introduced as part of the Finance Act of 2013 in an attempt to prevent such schemes.  Concerns about the national tax revenues are quite widely publicised and researched but there is very little research devoted to the study of how the value relevance of tax accounting information relates to the extent of corporate tax avoidance activity.  The research is important to users of reported accounting information including investors such as pension funds.  The tax accounting research has policy implications as the related corporate valuation risk impacts the collective investments of individuals such as pension scheme members and equity investors both large and small.

This research is particularly well-timed as there is increasing public interest in tax policy including that relating to anti-avoidance or ‘anti-abuse’ legislation in the UK and other jurisdictions.  The accounting profession is also conscious of the greater need for adequate tax disclosures for complex and risky transactions. 

The research is likely to increase the impact of Bournemouth University’s Faculty of Management on the accounting profession and the business community in the important disciplines of tax and accounting policy.

Dr Alan Kirkpatrick (Principal Investigator) – Dept of Accounting, Finance and Economics – akirkpatrick@bournemouth.ac.uk 

Dr Dragana Radicic – Dept of Accounting, Finance and Economics – dradicic@bournemouth.ac.uk