Auditor tax expertise and corporate tax avoidance: Evidence from Taiwan

• Published date: 01 July 2023
• Author: Wu‐Po Liu,Mengyu Ma,Zhenfeng Liu,Chun Yin So
• Date: 01 July 2023
• DOI: http://doi.org/10.1002/jcaf.22614

Received:  October Accepted:  December 

DOI: ./jcaf.

RESEARCH ARTICLE

Auditor tax expertise and corporate tax avoidance: Evidence

from Taiwan

Wu-Po Liu1Mengyu Ma2Zhenfeng Liu3Chun Yin So1

Department of Accountancy, National

Cheng Kung University, Tainan,Taiwan

College of Business, University of Central

Arkansas, Conway, Arkansas, USA

College of Business, University of

Michigan–Flint, Flint, Michigan, USA

Correspondence

Mengyu Ma, College of Business,

University of Central Arkansas, Conway,

AR, USA.

Email: mma@uca.edu

Funding information

National Science and TechnologyCouncil,

Grant/AwardNumber:

--H--; Higher Education

SPROUT Project and Center for

Innovative FinTechBusiness Models;

Ministry of Education to the Headquarters

of University Advancement at National

ChengKungUniversity(NCKU)

[Correction added on th January,after

first online publication: The First author’s

affiliation has been changed.]

Abstract

The link between auditor tax expertise and corporate tax avoidance is investi-

gated in this study. Using a sample of Taiwanese listed firms from between 

and , it is found that companies that hire auditor tax experts engage in a

higher level of tax avoidance. The results also show that this association is more

pronounced among firms that have subsidiaries registered in tax havens. The

findings of this study show that this positive association between auditor tax

expertise and corporate tax avoidance can be mitigated through the adoption of

IFRS. This study makes a contribution to existing literature by using a unique

Taiwanese setting tostudy the tax avoidance effect of auditor tax experts and the

effect of a common tax avoidance technique have on tax savings.

KEYWORDS

auditor tax expertise, IFRS, tax avoidance, tax haven

1 INTRODUCTION

Accounting firms assist multinational listed companies

in their planning of tax avoidance (BBC News, October ,

) and this has become an incredibly serious issue that

regulators must deal with. While the major tax preparers

in the world are accounting firms, it suggests a great

reliance by clients on accounting firms for their tax plan-

ning. In addition, accounting firms are regularly involved

in tax avoidance scandals, and many have received large

fines from regulator s as a result. For example, KPMG were

forced to pay $ million for tax fraud, resulting in $

billion in fake tax losses (US Department of Justice, August

, ). Due to the complex nature of tax planning, pre-

vious literature has suggested that companies are often too

heavily reliant on tax experts. Bonner et al. () found

tax expertise to be a major consideration in the corporate

tax planning process for producing better tax performance.

As a result, accounting firms may invest in tax knowledge

as a means of assisting clients in specific industries to

fulfill their tax planning requirements and increase their

revenue (Ferguson et al., ). In addition, the combined

tax and audit expertise and company-specific knowledge

of tax experts can help firms develop tax strategies for the

avoidance of tax (McGuire et al., ).

Many tax avoidance methods are used by companies,

such as tax havens. Due to the complexity of these tax

avoidance techniques and the lack of tax expertise in

companies, there is a tendency to rely on accounting

firms for developing robust tax plans. Therefore, it is more

advantageous for companies to employ tax accountants

or tax experts who have relevant tax experience as a

means of maximizing tax avoidance effects. A tax haven

is when a company registers subsidiaries on small islands

or in developing countries as a means of exploiting the

generous tax incentives that are offered by those countries

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