Contribution to the Assessment and Prediction of Companies’ Tax Risks in the Administration of Tax
Authors: Bayoma Wili Samara and C Yao Messah Kounetsron
Affiliations: Macroéconomiste-financier, Chef section budget à l’Office Togolais des Recettes; Maîtres de Conférences Agrégé, directeur de l’Institut Universitaire de Technologie de Gestion à l’Université de Lomé, TOGO
Source: African Multidisciplinary Tax Journal, 2022 Issue 1, p. 179-200
Tax risk management requires an adequate assessment of the risk based on previously identified determinants. The main objective of this article is to design a tax risk prediction tool. To achieve this objective, data were collected from about sixty big companies in Togo. The scoring method first identified tax risks determinants and then assessed and predicted that risk. The results show that in Togo, company size, transfer price, the leverage effect, the sector of activity, and the reputation of the accounting auditing firm negatively affect big companies’ tax compliance. In contrast, total indebtedness, foreign shareholders’ presence and tax incentives have a positive impact on their tax behaviour. With a predictive power of 75 per cent, this research empirically verifies that modern risk assessment methods improve the performance of the tax administration control system. Consequently, the Togolese Revenue Authority should focus on strengthening its control mechanism for big companies, particularly those involved in the financial sector. It should further prioritise the use of statistical and econometric methods to assess tax risk. However, an error margin of 25 per cent suggests the existence of other factors which could likely improve the appropriateness of the results.