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This&nbsp;study explores the relationship between tax aggressiveness and foreign capital participation in Brazilian companies listed on the BM &amp; F BOVESPA from 2010 to 2015, using&nbsp;the concept of tax aggressiveness as a reduction of taxable income through tax&nbsp;management and planning (Chen et al., 2010). Observing that previous studies&nbsp;show a significant relationship between tax aggressiveness and ownership&nbsp;structures, this research seeks to understand whether this relationship is&nbsp;significant if there is foreign capital participation in the company. The&nbsp;sample was composed of Brazilian companies listed on the BM&amp;F BOVESPA. Two&nbsp;metrics of tax aggressiveness were used to investigate this relationship:&nbsp;effective tax rate (ETR) and book-tax difference (BTD). The use of these&nbsp;metrics was inspired in a review on tax research by Hanlon and Heitzman (2010),&nbsp;who concluded that ETR and BTD could capture the reduction of taxable income&nbsp;through tax planning. The results showed no significant relationship between&nbsp;foreign capital participation and tax aggressiveness, demonstrating that the&nbsp;origin of equity capital is not a factor of tax aggressiveness.

mbrq.2020.15.04.pdf

Original Research 

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Foreign Capital Participation and Tax Aggressiveness in Brazilian Companies

This&nbsp;research aimed to analyze whether companies that present greater tax&nbsp;aggressiveness have different levels of persistence of earnings components. We&nbsp;measured tax aggressiveness by two proxies:&nbsp;&nbsp;i) book-tax differences and ii) effective tax rates. The study period&nbsp;was between 2010 and 2016, involving Brazilian companies listed on B3. The Effective&nbsp;Tax Rate metric classified the most tax aggressive companies. The results&nbsp;showed that companies, when segregated by levels of tax aggressiveness, present&nbsp;differentiated earnings persistence in its components. It is noted that, in&nbsp;most tax-aggressive companies, tax profit becomes a determining factor for book&nbsp;income in the future period. This work contributes to the accounting literature&nbsp;by identifying the impact of taxation on the earnings quality, particularly in&nbsp;the earnings persistence, a fundamental requirement for greater managerial and&nbsp;tax predictability and a greater direction of value for companies.

The Study of Tax Aggressiveness and Earnings Persistence and its Components

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