SOCIAL RESPONSIBILITY, MACHIAVELLIANISM AND TAX AVOIDANCE: A STUDY OF HONG KONG TAX PROFESSIONALS by William E. SHAFER, Lingnan University, Hong Kong and Richard S. SIMMONS, Lingnan University, Hong Kong and Visiting Scholar, Department of

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SOCIAL RESPONSIBILITY,
MACHIAVELLIANISM AND TAX AVOIDANCE A STUDY OF
HONG KONG TAX PROFESSIONALSbyWilliam E.
SHAFER, Lingnan University, Hong Kong and
Richard S. SIMMONS, Lingnan University, Hong
Kong and Visiting Scholar, Department of
Business Law and Taxation/ TLPRI Research
Scholar, Monash University, Australia
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Background

• Increasing concern over the ethical behaviour of
  professional tax advisors
• KPMG case
• The slippery slope from tax avoidance to tax
  evasion
• The effect of business education on (tax) ethics

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Objective

• To investigate the effects of tax professionals
• a) perceptions of corporate ethics/social
  responsibility, and
• b) Machiavellianism
• on their ethical judgements and willingness to
  acquiesce in aggressive tax avoidance schemes

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Corporate Ethics and Social Responsibility

• Responsibility of corporations to society in
  general and to connected individuals in
  particular
• Importance in recognising whether an ethical
  problem is even perceived in a given situation
• Relevance to ethics in taxation
• Measured by PRESOR scale (Singhapakdi et al.,
  1995)
• Stockholder and stakeholder views

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Machiavellianism

• Machiavellis The Prince
• A cold, calculating and manipulative personality
• Shown to have a significant impact on ethical
  decision making in several business contexts
• Measured by MACH IV scale (Christie and Geis,
  1970)

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Research Hypotheses

• 1) Tax professionals who believe more strongly in
  the importance of corporate ethics and social
  responsibility will judge aggressive tax
  avoidance schemes more negatively (less ethical
  and socially responsible).
• 2) Tax professionals who judge aggressive tax
  avoidance schemes more negatively (less ethical
  and socially responsible) will estimate a lower
  likelihood of acquiescence in such schemes.
• 3) Tax professionals with stronger Machiavellian
  orientations will believe less strongly in the
  importance of corporate ethics/social
  responsibility.
• 4) Tax professionals with stronger Machiavellian
  orientations will judge aggressive tax avoidance
  schemes less negatively (more ethical and
  socially responsible).

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Hypothesised relationships
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Methodology

• Survey of tax professionals in Hong Kong, the
  survey instrument consisting of
• The PRESOR scale
• The MACH IV scale
• Demographic information
• Scenarios to elicit ethical and social
  responsibility judgements and behavioural
  intentions

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Scenarios
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Responses Means (standard deviations)
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Empirical Model Standardised Regression
Coefficients (Significance) - Scenario A
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Empirical ModelStandardised Regression
Coefficients (Significance) - Scenario B
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Conclusions

• Strong empirical support for each of the four
  hypotheses.
• Tax professionals perceptions of the importance
  of corporate ethics and social responsibility had
  a significant impact on their ethical/social
  responsibility judgements wrt the tax scenarios,
  which in turn influenced their behavioural
  intentions.
• Participants scoring higher on Machiavellianism
  were less likely to feel that corporate ethics
  and social responsibility are important, and more
  likely to judge aggressive corporate tax
  avoidance schemes favourably.