Detecting tax evasion in the hospitality and tourism sector
-
DOIhttp://dx.doi.org/10.21511/afc.05(1).2024.05
-
Article InfoVolume 5 2024, Issue #1, pp. 57-67
- 86 Views
-
30 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
One of the industries with the fastest development is the hospitality and tourism (HoReCa) sector. However, there is also a growing trend in this sector to evade some state taxes. Despite promises that digitalization will reduce tax evasion, this practice nevertheless is a serious threat to the economy and the state. This study aims to process a comprehensive model for screening and risk assessment of tax fraud in the HoReCa sector in Romania. In this sense, an empirical study was conducted using an econometric model to detect tax evasion in the HoReCa sector in Romania, based on a sample of 50 firms for each sub-sector (hotels, restaurants, cafes), analyzing the period 2018–2022. The dependent variable of the model was the tax evasion risk indicator, calculated as the difference between the average financial ratios of each firm and the average for the entire sector. The results show that the leverage ratio has the strongest positive impact on the tax evasion risk indicator. The fixed asset turnover ratio and the accounts receivable turnover ratio also have a significant impact, indicating false sales reports or collection irregularities. The solvency ratio and the immediate liquidity ratio show positive effects on the risk of tax fraud, while the net rate of return is the only one with a negative effect, suggesting that profitable entities are less prone to tax evasion. The proposed model provides a solid basis for identifying high-risk companies directing tax authorities to improve supervision in the HoReCa industry. The findings also highlight the importance of further automating tax reporting systems to reduce the risks of evasion.
- Keywords
-
JEL Classification (Paper profile tab)C10, M41, H26
-
References45
-
Tables4
-
Figures0
-
- Table 1. Average financial ratios by sector, %
- Table 2. Summary of the econometric model
- Table 3. Coefficients
- Table 4. Type and order of influence of independent variables
-
- Alogogianni, E., & Virvou, M. (2023). Handling class imbalance and class overlap in machine learning applications for undeclared work prediction. Electronics, 12(4), 913.
- Badlaoui, A. E., Naji, S., & Chegri, B. (2024). Audit expectation gap: Evidence from Morocco. Investment Management and Financial Innovations, 21(2), 167-179.
- Banerjee, R. (2024). Corporate Frauds: Now Bigger, Broader and Bolder. Penguin Random House India Private Limited: Gurgaon.
- Cosmulese, C. G., & Socoliuc, M. I. (2019). The Challenges of Internal Audit, Between Technological Development and New Skills. European Journal of Accounting, Finance & Business, 7(3).
- Dănescu, T., Spătăcean, I. O., & Stejerean, R. M. (2021). Red flags in financial reporting-empirical studies in the AeRO market. Acta Marisiensis. Seria Oeconomica, 15(1), 15-28ю
- Dascălu, D., Ciorsac, A .A., & Isvoran, A. (2024). Computational assessment of the toxicological profiles of various chemicals to which humans are exposed. A review. Ovidius University Annals of Chemistry. Ovidius University of Constanta, 35(2), 83-90.
- Desai, M. A., & Dharmapala, D. (2009). Earnings management, corporate tax shelters, and book-tax alignment. National Tax Journal, 62(1), 169-186.
- Dirman, A. (2020). Financial distress: the impacts of profitability, liquidity, leverage, firm size, and free cash flow. International Journal of Business, Economics and Law, 22(1), 17-25.
- Eichfelder, S., & Hechtner, F. (2018). Tax compliance costs: Cost burden and cost reliability. Public Finance Review, 46(5), 764-792.
- García-Madurga, M. Á., Esteban-Navarro, M. Á., & Morte-Nadal, T. (2021). Covid key figures and new challenges in the Horeca sector: The way towards a new supply-chain. Sustainability, 13(12), 6884.
- Garfatta, R., Zorgati, I., & Zaabi, E. (2022). Do Tunisian firms manage their earnings around the corporate tax rate cut? Investment Management and Financial Innovations, 19(1), 350-359.
- Grosu, V., Cosmulese, C. G., Socoliuc, M., Ciubotariu, M. S., & Mihaila, S. (2023). Testing accountants’ perceptions of the digitization of the profession and profiling the future professional. Technological Forecasting and Social Change, 193, 122630.
- Guedrib, M., & Hamdi, Z. (2024). Investigating tax risk’s influence on tax avoidance and debt costs: evidence from France. Journal of Financial Crime, Vol. ahead-of-print, No. ahead-of-print.
- Halilbegovic, S., Celebic, N., Cero, E., Buljubasic, E., & Mekic, A. (2020). Application of Beneish M-score model on small and medium enterprises in Federation of Bosnia and Herzegovina. Eastern Journal of European Studies, 11(1), 146-163.
- Hanlon, M., & Slemrod, J. (2009). What does tax aggressiveness signal? Evidence from stock price reactions to news about tax shelter involvement.Journal of Public Economics, 93(1-2), 126-141.
- Hasan, I., Hoi, C. K. S., Wu, Q., & Zhang, H. (2014). Beauty is in the eye of the beholder: The effect of corporate tax avoidance on the cost of bank loans. Journal of Financial Economics, 113(1), 109-130.
- Hauptman, L., & Hlastec, A. (2023). Exploring the relationship between individual tax culture and Schwartz’s higher-order personal values among accountants as taxpayers in Slovenia. Problems and Perspectives in Management, 21(3), 714-725.
- Hauptman, L., Žmuk, B., & Dečman, N. (2024). Tax governance in compliance: The role of motivational postures and behavioral intentions. Problems and Perspectives in Management, 22(1), 500-513.
- Hołda, A. (2020). Using the Beneish M-score model: Evidence from non-financial companies listed on the Warsaw Stock Exchange. Investment Management & Financial Innovations, 17(4), 389.
- Johannesen, N., Tørsløv, T., & Wier, L. (2020). Are less developed countries more exposed to multinational tax avoidance? Method and evidence from micro-data. The World Bank Economic Review, 34(3), 790-809.
- Klassen, K. J., & Laplante, S. K. (2012). Are US multinational corporations becoming more aggressive income shifters?Journal of Accounting Research, 50(5), 1245-1285.
- Koumarianos, E., Kapsalis, A., & Avgeris, N.(2019). Social security compliance in times of crisis. Evaluating the factors for non-compliance in the HORECA sectors in Greece. Social Cohesion and Development, 14(2), 105-122.
- Kuzior, A., Zakharkina, L., Kubaščikova, Z., Chentsov, V., & Lyeonov, S. (2023). Insurance market transparency research trends: Bibliometric analysis. Insurance Markets and Companies, 14(1), 136-152.
- Lanis, R., & Richardson, G. (2012). Corporate social responsibility and tax aggressiveness: a test of legitimacy theory. Accounting, Auditing & Accountability Journal, 26(1), 75-100.
- Lim, Y. (2011). Tax avoidance, cost of debt and shareholder activism: Evidence from Korea. Journal of Banking & Finance, 35(2), 456-470.
- Macovei, A. G., Ionescu-Feleagă, L., Grosu, V., Tulvinschi, M., & Cosmulese, C. G. (2024). New Solutions for Assessing Corporate Social Responsibility in Pharmaceutical Companies: A Mathematical Modelling Approach. Economic Computation & Economic Cybernetics Studies & Research, 58(2), 264-280.
- Mazurenko, O., Tiutiunyk, I., Cherba, V., Artyukhov, A., & Yehorova, Y. (2023). Shadow tax evasion and its impact on the competitiveness of the country’s tax system. Public and Municipal Finance, 12(2), 129-142.
- Minh Ha, N., Phuong Trang, T. T., & Vuong, P. M. (2022). Relationship between tax avoidance and institutional ownership over business cost of debt. Cogent Economics & Finance, 10(1), 2026005.
- Mkadmi, J. E., & Ali, W. B. (2024). How does tax avoidance affect corporate social responsibility and financial ratio in emerging economies? Journal of Economic Criminology, 5, 100070.
- Mocanu, M., Constantin, S. B., & Răileanu, V. (2021). Determinants of tax avoidance–evidence on profit tax-paying companies in Romania. Economic Research-Ekonomska Istraživanja, 34(1), 2013-2033.
- Oprea, A. (2010). L’article 3 § 4 du Règlement Rome I sur la loi applicable aux obligations contractuelles et les contratsintracommunautaires [Art. 3§4 of the Rome I Regulation on the Law Applicable to Contractual Obligations and the Intra-community Contracts]. Studia Universitatis Babes Bolyai-Iurisprudentia, 55(3), 3-14.
- Perpelea, S., & Beldiman, D. (2016). Tax evasion in Romania: New approaches. Finance. Challenges of the Future, 16(18), 109-117.
- Pițu, I., Ciocanea, B. C., & Petrașcu, D. (2021). Tax Evasion-Corrosive Factor for the National Economy. European Journal of Interdisciplinary Studies, 13(1), 58-75.
- Sánchez-Ballesta, J. P., & Yagüe, J. (2023). Tax avoidance and the cost of debt for SMEs: Evidence from Spain. Journal of Contemporary Accounting & Economics, 19(2), 100362.
- Shonhadji, N., & Irwandi, S. A. (2024). Fraud prevention in the Indonesian banking sector using anti-fraud strategy. Banks and Bank Systems, 19(1), 12-23.
- Shubita, M. F., Alrawashedh, N. H., Shubita, D. F., & Salahaldin, A. D. (2024). Capital expenditure, tax avoidance and bank performance: Evidence from Jordanian banks. Investment Management and Financial Innovations, 21(3), 124-134.
- Sikayu, S. H., Rahmat, M. B., Ai Nyet, C., & Juliati. (2022). Fairness, transparency and attitude towards tax evasion amongst owners of SMEs. International Journal of Service Management and Sustainability, 7(1), 185-206.
- Silalahi, S., Hanif, R.A., Supriono, S., Hariyani, E., & Wiguna, M. (2023). Determinants influencing fraud prevention in e-procurement: Empirical evidence from Indonesia. Innovative Marketing, 19(4), 199-206.
- Socoliuc, M., Mihalciuc, C., & Cosmulese, G. (2018). Tax Evasion in Romania–Between Past and Present. LUMEN Proceedings, 6(1), 406-412.
- Stancu, S., Bodea, C.-N., & Popescu, O. M. (2020). Tax evasion in Romania as a component of the shadow economy-estimates, analysis and predictions. Romanian Statistical Review, 2, 33-46.
- Suryandari, N. N. A., Yadnyana, I. K ., Ariyanto, D., & Erawati, N. M. A. (2023). Determinant of fraudulent behavior in the Indonesian rural bank sector using the fraud hexagon perspective. Banks and Bank Systems, 18(4), 181-194.
- Usman, A., & Sundari, S. (2024). The influence of village financial system (Siskeudes application), transparency, and internal control on fraud prevention. Public and Municipal Finance, 13(2), 24-30.
- Vâlsan, C., Druică, E., & Ianole-Călin, R. (2020). State capacity and tolerance towards tax evasion: First evidence from Romania. Administrative Sciences, 10(2), 33.
- Voinea, L., Lovin, H., & Cojocaru, A. (2018). The impact of inequality on the transmission of monetary policy. Journal of International Money and Finance, 85, 236-250.
- Williams, J. W. (2014). The private eyes of corporate culture: The forensic accounting and corporate investigation industry and the production of corporate financial security. In Walby, K., & Lippert, R. K. (Eds.), Corporate security in the 21st century: Theory and practice in international perspective (pp. 56-77). London: Palgrave Macmillan.