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Evaluating the Tax Compliance Costs of Small and Medium Enterprises Operated by Individuals under Alternative Enterprise Tax Regimes in Indonesia(2022) Ferry, FerryThesisThis study investigates the tax compliance costs of small and medium enterprises operated by individuals (individual SMEs) in Indonesia. It estimates and compares these costs under two different tax regimes operated in Indonesia: a presumptive tax regime that applies a single, final tax rate on annual turnover; and the regime that applies a more conventional, progressive tax rate schedule on calculated taxable income. The estimation and comparison involve all components of tax compliance costs, including explicit, implicit, and psychological costs. The research is motivated by two main considerations. First, it focuses on individual SMEs because personal income taxpayers are by far the largest group of all taxpayers in Indonesia (91 per cent in 2018; see (DGT, 2019a)) and the contribution of SMEs is significant for Indonesia’s Gross Domestic Product (63 per cent in 2018; see (Indonesia, 2019)). Secondly, despite their obvious importance, and despite significant research that has been conducted in many parts of the world (Alm, 2019, p. 32), the issue of tax compliance costs borne by individual SMEs in Indonesia has remained a relatively unexplored topic. Moreover, research into the psychological costs of tax compliance and research comparing the compliance costs of two different tax regimes in the same tax system has in each case been particularly limited. Thus, this study proposes a systematic analysis to address a series of research questions related to these under-explored areas relating to the tax compliance costs of individual SMEs in Indonesia. By applying a mixed-modes research method, the study not only reveals the average costs to comply for each taxpayer under different tax regimes, but also identifies the significance of the total costs and the potential drivers of those costs. In addition, further analysis provides a novel understanding of aspects of tax compliance costs by showing how the components of the costs interact with each other. Finally, the findings may be useful for policymakers in Indonesia given that the presumptive tax regime will cease to exist in 2025.
The Effect of the Framing of Coaching Guidance and Communication Mode on Auditors’ Professional Scepticism(2022) Sakchuenyos, PaulThesisRegulators have expressed concerns about the level of professional scepticism of auditors, especially when performing remote auditing. This thesis examines the effect of virtual coaching guidance to enhance professional scepticism of auditors with varying levels of audit experience. Given the importance of communication to reinforce professional scepticism, Study 1 examines the effectiveness of the expression of virtual coaching guidance, expressed either to promote desirable behaviours that positively affect audit quality (promotive coaching) or to prohibit undesirable behaviours that negatively affect audit quality (prohibitive coaching). The results show that the effect of the type of coaching varies with the experience of the coachee. After controlling for coaching goal relevance, less experienced auditors provide marginally more sceptical judgments when receiving promotive coaching, but this is not the case for more experienced auditors. More experienced auditors select actions they believe to be marginally more sceptical when receiving prohibitive coaching, but this is not the case for less experienced auditors. Given the changing nature of auditors to work partially or fully remotely, Study 2 examines the effectiveness of the delivery of virtual coaching guidance, delivered virtually via either video or audio. Study 2 provides evidence that video coaching can be more effective than audio coaching in enhancing sceptical judgments of less experienced auditors but not of more experienced auditors. This thesis contributes to the literatures on auditors’ learning and on professional scepticism by showing that, when coaching methods match with audiences and tasks, coaching can enhance professional scepticism. This thesis should also be of interest to auditors, audit firms, and audit regulators. This thesis informs auditors that it is important that they consider audit experience of coachees when providing coaching. It also provides guidance of how audit firms should train auditors to provide coaching. and informs audit regulators about the importance of the design of coaching activities in audit firms.
THE IMPACT OF CARBON REPORTING SCHEMES AND CREDIBILITY ENHANCEMENT MECHANISMS ON CARBON EMISSIONS GROWTH(2021) Ge, IreneThesisThe ratification of the Paris Agreement has led to a rapid transition towards a mandatory reporting landscape for carbon emissions on a global scale. Demand has increased the need for performance and impact disclosures of carbon emissions at both the country and company levels. Extant research literature currently lags the regulatory momentum and development of carbon disclosures in examining the benefits of regulatory reporting schemes, as well as credibility enhancement mechanisms such as carbon assurance. My thesis examines the impact of carbon reporting schemes and credibility enhancement mechanisms, carbon policy risk, and the cost of debt financing on carbon emissions growth. Study One examines the impact of variations of current carbon-related reporting schemes across countries. It uses a panel of 123 countries (1,600 country-year observations) covering the period 1990-2016. Study Two differentiates between home and host countries’ reporting schemes for multinational companies and collects 6,664 observations from 45 countries covering the period 2011- 2017. My results reveal that the strength of carbon reporting schemes and credibility enhancement mechanisms contribute to curbing carbon emissions growth at the country and the company level. The effects of credibility enhancement mechanisms are both robust and enduring. There is also evidence of a trade-off between the strength of reporting schemes and credibility enhancement mechanisms. My results demonstrate that the credibility of reported carbon emissions is a critical first step in working towards climate change mitigation. Study Three employs data sets from the first two studies and measures the impact of carbon policy risk. It finds that carbon policy risk, and the cost of debt financing, have a negative association with carbon emissions growth. This provides evidence of the role of financial institutions in facilitating a client company’s carbon emissions reduction. My thesis results constitute empirical evidence that informs both companies regarding the benefits of undertaking carbon assurance and emissions reduction programs in the face of diverse regulatory reporting schemes, and global and national regulators regarding the role of accounting and credibility enhancement mechanisms in holding countries and companies accountable for carbon emissions growth. Strengthening reporting schemes and emphasizing credibility enhancement mechanisms could aid in slowing down carbon emissions growth.