Malaysian corporate tax rate and revenue: the application of Ibn Khaldun tax theory
Purpose – The present study aims to investigate the impact of the reduction of the corporate tax rate on corporate tax revenue. The study adopts the theory of taxation by Ibn Khaldun, depicted as the Laffer curve. Design/methodology/approach – The paper analyses time series data for the period 199...
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| Language: | English English |
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Emerald Publishing Limited
2018
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| Online Access: | http://irep.iium.edu.my/67694/ http://irep.iium.edu.my/67694/ http://irep.iium.edu.my/67694/1/IJIF-07-2017-0011.pdf http://irep.iium.edu.my/67694/7/67694_Malaysian%20corporate%20tax%20rate%20and%20revenue_scoopus.pdf |
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iium-676942019-01-08T02:01:29Z http://irep.iium.edu.my/67694/ Malaysian corporate tax rate and revenue: the application of Ibn Khaldun tax theory Annuar, Hairul Azlan Isa, Khadijah Ibrahim Aramide, Salihu Solarin, Sakiru Adebola HF5601 Accounting. Bookkeeping Purpose – The present study aims to investigate the impact of the reduction of the corporate tax rate on corporate tax revenue. The study adopts the theory of taxation by Ibn Khaldun, depicted as the Laffer curve. Design/methodology/approach – The paper analyses time series data for the period 1996 to 2014 using the autoregressive distributed lag (ARDL) approach. Findings – The paper finds that the corporate tax rate has a dual effect on corporate tax revenue over the study period. It shows an inverted U-shape relationship between the corporate tax rate and corporate tax revenue and reveals that the optimal tax rate is 25.5156 per cent. Inferentially, a positive relationship exists between the two variables prior to the optimal tax rate, and a negative relationship prevails afterwards. A further test of causality shows a long-run unidirectional causality between corporate tax rate and corporate tax revenue. Research limitations/implications – First, it should be noted that the policy was not implemented in isolation. Several other tax incentives were given to corporate tax payers, and therefore, such incentives should be controlled for to have a more insightful evaluation of the policy. Second and most important, there is a need to investigate whether the increased cash flow available to firms as a result of the reduction in the corporate tax rate adds value to firms. It is also necessary to investigate whether firms’ stakeholders benefited from the increased cash flow or was there managerial diversion of firms’ resources. Practical implications – The policy of gradual reduction of the corporate tax rate in Malaysia is suspected to have a positive impact on the productivity of Malaysian companies, which has contributed to an increase in corporate tax revenue. It also has a positive impact on the economic growth of the country. It means that the lower corporate tax rate has actually reduced the cost of doing business in the country. Originality/value – The benefit of increased corporate tax revenue needs to be investigated empirically for insightful policy evaluation. In Malaysia, however, such investigation is close to non-existent to the best knowledge of the researchers. Thus, the present study aims at investigating the impact of the policy of gradual reduction of the corporate tax rate on corporate tax revenue over an 18-year period from 1996 to 2014. Emerald Publishing Limited 2018-10 Article PeerReviewed application/pdf en http://irep.iium.edu.my/67694/1/IJIF-07-2017-0011.pdf application/pdf en http://irep.iium.edu.my/67694/7/67694_Malaysian%20corporate%20tax%20rate%20and%20revenue_scoopus.pdf Annuar, Hairul Azlan and Isa, Khadijah and Ibrahim Aramide, Salihu and Solarin, Sakiru Adebola (2018) Malaysian corporate tax rate and revenue: the application of Ibn Khaldun tax theory. ISRA International Journal of Islamic Finance, 10. pp. 251-262. ISSN 0128-1976 https://www.emeraldinsight.com/doi/full/10.1108/IJIF-07-2017-0011 |
| repository_type |
Digital Repository |
| institution_category |
Local University |
| institution |
International Islamic University Malaysia |
| building |
IIUM Repository |
| collection |
Online Access |
| language |
English English |
| topic |
HF5601 Accounting. Bookkeeping |
| spellingShingle |
HF5601 Accounting. Bookkeeping Annuar, Hairul Azlan Isa, Khadijah Ibrahim Aramide, Salihu Solarin, Sakiru Adebola Malaysian corporate tax rate and revenue: the application of Ibn Khaldun tax theory |
| description |
Purpose – The present study aims to investigate the impact of the reduction of the corporate tax rate on
corporate tax revenue. The study adopts the theory of taxation by Ibn Khaldun, depicted as the Laffer curve.
Design/methodology/approach – The paper analyses time series data for the period 1996 to 2014 using
the autoregressive distributed lag (ARDL) approach.
Findings – The paper finds that the corporate tax rate has a dual effect on corporate tax revenue over the
study period. It shows an inverted U-shape relationship between the corporate tax rate and corporate tax
revenue and reveals that the optimal tax rate is 25.5156 per cent. Inferentially, a positive relationship exists
between the two variables prior to the optimal tax rate, and a negative relationship prevails afterwards. A
further test of causality shows a long-run unidirectional causality between corporate tax rate and corporate
tax revenue.
Research limitations/implications – First, it should be noted that the policy was not implemented in
isolation. Several other tax incentives were given to corporate tax payers, and therefore, such incentives
should be controlled for to have a more insightful evaluation of the policy. Second and most important, there is
a need to investigate whether the increased cash flow available to firms as a result of the reduction in the
corporate tax rate adds value to firms. It is also necessary to investigate whether firms’ stakeholders benefited
from the increased cash flow or was there managerial diversion of firms’ resources.
Practical implications – The policy of gradual reduction of the corporate tax rate in Malaysia is
suspected to have a positive impact on the productivity of Malaysian companies, which has contributed to an
increase in corporate tax revenue. It also has a positive impact on the economic growth of the country. It
means that the lower corporate tax rate has actually reduced the cost of doing business in the country.
Originality/value – The benefit of increased corporate tax revenue needs to be investigated empirically
for insightful policy evaluation. In Malaysia, however, such investigation is close to non-existent to the best
knowledge of the researchers. Thus, the present study aims at investigating the impact of the policy of
gradual reduction of the corporate tax rate on corporate tax revenue over an 18-year period from 1996 to 2014. |
| format |
Article |
| author |
Annuar, Hairul Azlan Isa, Khadijah Ibrahim Aramide, Salihu Solarin, Sakiru Adebola |
| author_facet |
Annuar, Hairul Azlan Isa, Khadijah Ibrahim Aramide, Salihu Solarin, Sakiru Adebola |
| author_sort |
Annuar, Hairul Azlan |
| title |
Malaysian corporate tax rate and revenue: the application of Ibn Khaldun tax theory |
| title_short |
Malaysian corporate tax rate and revenue: the application of Ibn Khaldun tax theory |
| title_full |
Malaysian corporate tax rate and revenue: the application of Ibn Khaldun tax theory |
| title_fullStr |
Malaysian corporate tax rate and revenue: the application of Ibn Khaldun tax theory |
| title_full_unstemmed |
Malaysian corporate tax rate and revenue: the application of Ibn Khaldun tax theory |
| title_sort |
malaysian corporate tax rate and revenue: the application of ibn khaldun tax theory |
| publisher |
Emerald Publishing Limited |
| publishDate |
2018 |
| url |
http://irep.iium.edu.my/67694/ http://irep.iium.edu.my/67694/ http://irep.iium.edu.my/67694/1/IJIF-07-2017-0011.pdf http://irep.iium.edu.my/67694/7/67694_Malaysian%20corporate%20tax%20rate%20and%20revenue_scoopus.pdf |
| first_indexed |
2023-09-18T21:36:05Z |
| last_indexed |
2023-09-18T21:36:05Z |
| _version_ |
1777412829711695872 |