158 Int. J. Revenue Management, Vol. 6, Nos.

3/4, 2012
Copyright 2012 Inderscience Enterprises Ltd.











The determinants of corporate tax avoidance in
Tunisian context
Mohamed Ali Omri* and Ins El Aissi
Faculty of Economic Sciences and Management of Tunis,
University of Tunis El Manar,
Campus Universitaire El Manar B.P. 248 El Manar II, 2092, Tunis
E-mail: medomri@gmail.com
E-mail: ineselaissi@yahoo.fr
*Corresponding author
Abstract: The current paper explores the determinants of tax avoidance
activity being considered as a practice that is very close to revenue
management. In fact at a macro level, it is claimed that tax avoidance has
impacts on revenue management. These determinants will be examined with
reference to the positive accounting theory. The results of this study undertaken
near 39 Tunisian listed firms from 2001 to 2006 reveal that tax avoidance is
tributary mainly of the size, the age and the profitability of the company.
Keywords: revenue management; RM; corporate tax avoidance; book-tax
difference; Tunisian listed firms.
Reference to this paper should be made as follows: Omri, M.A. and El Aissi, I.
(2012) The determinants of corporate tax avoidance in Tunisian context,
Int. J. Revenue Management, Vol. 6, Nos. 3/4, pp.158174.
Biographical notes: Mohamed Ali Omri is a Professor of Accounting at the
Faculty of Economics and Management of Tunis. He is responsible for the
research team tax accounting controls and auditing. Also, he is the author of
two books on taxation of companies and several articles on taxation, auditing
and corporate governance.
Ins El Aissi received a master degree in accounting from the higher institute of
management (University of Tunis) and a PhD in Management from the same
university. She received diploma of advanced studies in accounting from
Higher Institute of Accounting and Business Administration (University of
Manouba). Currently, she is an Assistant in the Department of Accounting in
Higher Institute of Finance and Taxation. Her main research interests and
publications are in accounting and taxation.

1 Introduction
The frequent use of revenue management (RM) has generated the need for researches to
identify the significant activities to reach successful RM performance. We can identify
two types of activities which underline such a success: first, increase the revenue and
second decrease the cost. Beck et al. (2010) identified and validated the underlying
dimensions of activities important to successful RM performance, through increasing the









The determinants of corporate tax avoidance in Tunisian context 159












revenue. Other researchers focused on the activities that can improve performance
through decreasing costs. Recently, Eldomiaty (2010) showed that big growth is
associated with lower costs and lower sales. Indeed and contrary to what is expected, a
high turnover does not consistently generate a high performance.
Accordingly, it would be relevant to focus on costs when RM is dealt with. Among
costs paid by a firm tax cost is the most important. In this context, and in order to reach a
high performance, each firm should try to increase its revenues on the one hand and
reduce tax costs on the other. This research focuses on the activity that can alleviate tax
costs through a legal method that is the tax avoidance. The latter practice, however, may
lead to the possibility of decreasing revenues. Thus, such practice can, in some cases, be
a constraint to RM. If tax avoidance becomes widely practised, the government will be
obliged to increase the tax rate to compensate the potential loss. If so, the consumers
purchasing power drops and so do companies turnovers.
Tax avoidance is defined as an activity that reduces tax liability through legal
methods. Its aftermaths are certain as opposed to tax evasion which is illegal with
uncertain aftermaths depending on the probability of fraud detection.
1.1 The study objective
The main purpose of this study is to examine the extent to which the characteristics of the
firms (such as: the size, the sector of activity, the ownership structure, the organisational
structure, its age, the profile of the auditor, and the firm profitability) can explain the
corporate tax avoidance activity.
Examining whether the firms characteristics influence the level of tax avoidance is
interesting for at least two reasons. First, the investor can detect the firms ability to
practise tax avoidance because this activity can yield important tax savings. Graham and
Tucker (2006) estimated that tax avoidance result deductions equal 9% of the total assets.
Consequently, however, it can generate consequently low revenue. In fact abusive tax
avoidance schemes further erode administrative resources and revenue. To counteract this
lack, the state can increase the tax rate which, in turn, affects the ability of the consumers
spending and thus reduces the companies income.
Second, this paper interests legislators and tax specialists in their understanding of
corporate tax avoidance. The latter is a serious problem that damages the economic
growth. For this reason, it must be dealt with and reduced.
1.2 Contributions of the study
Academic researches have largely focused on the manner in which taxes influence
decision making within companies. They studied its effect on organisational and financial
choices (debt policy, capital structure ....). This paper is primarily interested in the study
of tax avoidance through the options recommended by the tax and accounting legislation
in power. In this vein, tax avoidance is accounted for as an activity in itself and not as a
mere parameter the manager considers when making a decision.
This study makes several contributions. First, it enriches the literature on RM by
introducing the tax cost. In fact, most researches do not include the tax cost when
studying the RM.
Second, it contributes to the current research that investigates the disparity in firms
tax avoidance activities. Latest studies reveal that there is significant disparity in firms









160 M.A. Omri and I. El Aissi












aptitude to make corporate tax avoidance (Dyreng et al., 2008) but the determinants of
such activity are still ambiguous (Hanlon and Heitzman, 2010; Dyreng et al., 2008).
Conflicting results on the one hand and the lack of research on the other cause such
ambiguity. This paper aims to fill the gap by providing evidence on the association
between the corporate tax avoidance and the characteristics of the firm.
Third, unlike most previous studies of corporate tax avoidance, which focused on
only one factor (McGuire et al., 2010; Chen et al., 2010; Dyreng et al., 2010; Holland,
1998; Desai and Dharmapala, 2006), this study simultaneously, examines several factors
which affect the tax avoidance practice.
It is to be noted that this study will not cover all tax avoidance determinants. The
focus will be on the most important ones that influence this behaviour. As a matter of
fact, there are other factors that minimise this practice such as debt. Several study showed
that companies with high debt ratio are less likely to manage the earnings to decline
(Guenther, 1994; Yin and Cheng, 2004).
The determinants will be dealt with only from an economical point of view regardless
of the moral and political motives whose importance is acknowledged but too difficult to
measure (Gauthier, 2000).
The current work will identify the determinants of the corporate tax avoidance
through a review of literature and then try to validate them empirically with reference to
some Tunisian listed firms.
2 The relation between management revenue and tax avoidance
At a micro level it is proved that RM does not extend to tax avoidance and the latter, in
turn, does not influence the RM. in effect, these two variables namely, tax avoidance and
the RM must be studied simultaneously because the firm that wants to optimise its
revenue should necessarily optimise its tax costs. Evidently, the firms growth depends
not only on RM but also on tax management or tax avoidance.
At a macro level, however, it is perceived that tax management impacts RM.
The public services and the goods provided by the state are generally financed by
taxation. This depends on everyones tax contribution. When tax avoidance becomes
widely practised, the countrys level of revenue decreases. The government, therefore,
will be obliged to increase the tax rate to offset the loss. A vicious circle may then
emerge of tax avoidance and tax rate increase with adverse consequences for the public
finances and social cohesion (Ferreira and Walton, 2006).
Evidently, if the tax rate increases, the consumers purchasing power decreases and
thus companies turnovers go down. It is worthwhile that tax avoidance can counteract
the RM. That is why a study of the former while dealing with the latter is highly
recommended.
3 The determinants of the corporate tax avoidance
The literature on corporate tax avoidance attempted to describe and formalise the
individual income tax (rather than corporate income tax) mainly in using the expected









The determinants of corporate tax avoidance in Tunisian context 161












utility theory which consists in determining the part of income declared that maximises
the expected utility. Slemrod (2004) stressed the need to distinguish between individuals
and corporations so as to explain the fiscal regularity behaviour and suggested that this
behaviour should be analysed in the context of the agency theory.
The economical theory of regulation can be considered as a reference since it
considers the firm as an entity in relation to the society as a whole. Through its public
institutions, the latter requires shareholders to pay certain expenses which they consider a
burden (Raffournier, 1990).
Hanlon et al. (2007) examined the relationship between corporate tax non compliance
and several corporate characteristics such as the firm size, industry, type (multinational or
others), public trade, the form of executive compensation arrangements and governance
characteristics. The results of the research showed that large firms, privately owned and
multinationals tend to practise tax avoidance. Ahmed (2004) proposed to model the
corporate tax liabilities based on the agency theory frame where the State is the
principal which seeks to collect the entire owing tax while the firm is the agent that
seeks to maximise its wealth.
The present work is based on the positive accounting theory which is derived from
both the agency theory and the economical theory of regulation. Indeed, the positive
accounting theory studies the contractual, economical and political motivations and their
impact on the result of some accounting choices made by firms. Even though this theory
does not distinguish between the book income and tax income this work does because
corporate tax avoidance is accounted for as the action of minimising the tax income (in
relation to the book income) benefiting from some fiscal advantages. Thus, the
determinants which, according to this theory, are liable to push firms to minimise the
result can also be used to explain the reduction of tax income.
The positive accounting theory is limited to mention three determinants to decrease
the result: the size, the sector of activity and the ownership structure. However, some
other empirical studies, mainly those of Holland (1998), Gramlich et al. (2004), Tedds
(2006) and Ahmed (2004) listed some other determinants such as the organisational
structure, the age of the firm, the profile of the audit firm and the profitability of the firm.
3.1 The size of the firm
The hypothesis of the political costs driven from the positive accounting theory is based
on the act that big firms are more affected by the political pressures than the small ones
because they are subject to one of the biggest transfer of wealth. Indeed, the bigger the
firm is, the more it contributes to the state financing. The government, therefore, is
interested in the performances of the big firms. According to this theory, the political
costs influence the behaviour of the firms towards the result by minimising it through the
accounting choices (Deakin, 1989; Malmquist, 1990) or following a change of the
methods (Labelle, 1990) or also through the earning management (Cormier and Magnan,
1995; Cormier et al., 1998). The use of one of these three methods temporarily minimises
of the result, since they consist in repatriating the expenses in the progressing year and
deferring the profits in the following year (Stolowy and Breton, 2000). Lisowsky (2010)
reported that tax avoidance measured by the book tax difference is positively related to
size of the firm. If the size was proved to be a determinant that urges firms to temporarily
reduce their revenues through some accounting choices, it would be therefore expected
that it is positively related to corporate tax avoidance.









162 M.A. Omri and I. El Aissi












3.2 The sector of activity
Following the positive accounting theory, some sectors may represent a risk of
political costs more than some others, such as, the energy sector, which generally
constitutes the target of the political pressures for the transfer of the wealth (Cormier et
al., 1998).
Researchers asserted that the corporate tax avoidance varies from one sector to
another. Dyreng et al. (2008), for example, found that the firms that succeed in
reducing their effective tax rate (ETR) vary across industries. The industry with
the lowest ETR is that of petroleum and transportation. This is confirmed by
McIntyre and Nguyen (2000) who declared that in the USA, ETR varies widely
according to the sector. The oil companies, for example, have a low ETR and take an
advantage of benefits offered to them by regulation. In this respect, Holland (1998)
showed that the industrial sector, mainly the mineral extraction one has relatively the
highest ETR. As for the developing countries and according to Derashid and Zhang
(2003) the effect on the TIE sector is relevant as a result of explicit industrial policies
adopted by several governments. Mills et al. (1998) argued that the expenses incurred in
tax management are higher for the manufacturing, agricultural, mining, oil and gas, than
for others.
The study by Gramlich et al. (2004) revealed that the ETR in firms specialised in
trade, construction and service is very much higher compared to other industries.
Accordingly, there is no consensus on the industry acting as a source of pressure on the
tax authorities.
This discrepancy in the results is due to the differences in sector policies and tax
regimes. To study the effect of the sector in tax avoidance, in Tunisia, a brief analysis of
the sector policy and the tax system is needed.
The investment incentives code provides tax advantages for certain activities and not
for others. This segregation may reflect the pressure imposed by these companies on
public administration. In fact and as a result of such pressure, the public administration
afforded some tax incentives to the firms operating in such sectors.
Since these incentives will be captured such firms are expected to follow more tax
avoidance practices. Therefore, the firm mentioned in the code has a propensity to
exercise the corporate tax avoidance more than the others.
3.3 The ownership structure
The positive accounting theory applies to the entrepreneurial firms (in which the manager
possesses an important part of capital) which prefer the methods that decrease the result.
This is explained by the fact that these managers want to maximise the values of their
shares in minimising the tax. The managerial firms, by contrast, prefer the methods which
increase the result.
Some empirical studies focused on the effect of the ownership structure on the
reduction of tax through the choice of the accountants methods and the earnings
management (Dhaliwal et al., 1982; Cormier et al., 1998; Dyreng et al., 2010; Martin et
al., 2008). According to the political cost hypothesis, Martin et al. (2008) confirmed that
managers may under-state reserves to justify lower rates to regulators. In the same vein,
Dyreng et al. (2010) argued that individual

top executives have incremental effects on the









The determinants of corporate tax avoidance in Tunisian context 163












level of corporate tax avoidance

that cannot be explained by the other characteristics of
the firm.
Within the Tunisian context, managers are used to be founding family members, thus
expected to outperform their non-founding family counterparts in being tax planners.
However, Chen et al. (2010) found that firms owned and run by founding family
members are less tax aggressive than their non-founding family counterparts. They
attributed this to the fact that firms owned and run by founding family members are
characterised by a unique agency conflict between dominant and small shareholders. That
is why family owners are willing to forgo tax benefits to avoid the non-tax cost which can
arise from minority shareholders.
These conflicting results lead to test the relationship between corporate tax avoidance
and the ownership structure. We appraise that the ampleness of the corporate tax
avoidance is more important to the entrepreneurial firms than to those managerial. It is
assessed, in this context, that the ampleness of the corporate tax avoidance practice is
more important in the entrepreneurial firms than in the managerial ones.
3.4 The organisational structure
According to the economic regulation theory the effectiveness of the group is greater than
a single unit. In fact groups structuring can exercise a strong influence on the
administration in order to receive some tax incentives. On the other hand, it can avoid tax
through several ways (through transfer pricing). According to Sikka and Willmott (2010)
transfer pricing is perceived as a technique for optimal allocation of costs and revenues
among divisions, subsidiaries and joint ventures within a group of related entities. They
showed how this practice is deeply related to the processes of enhancing private gains by
avoiding the payment of public taxes. They proved that transfer prices practices are used
by corporations to avoid taxes in developing and developed economies.
Gramlich et al. (2004) conducted a study in Japanese companies and claimed that
unlike independent firms, corporations can lighten their tax burden by shifting business
income from most taxable to under taxable.
Accordingly, complex structures could encourage firms to apply tax avoidance.
Indeed, companies can create groups just for tax benefits. Greenberg (1979) explained
that holding companies are created simply to obtain tax advantages. Evidently, firms with
a large number of subsidiaries manage to reduce their future tax liabilities by, for
example, reinvesting in a subsidiary which allows the exoneration of profit.
3.5 The age of the firm
Ahmed (2004) put in evidence the positive relationship between the age of the firm and
its capacity to minimise the tax liabilities, by capturing the fiscal advantages as foreseen
by the legislation. Indeed, the older the firm is, the more it is capable of seising the
opportunities of tax avoidance. Tedds (2006), however, argued that the effect of a firms
age is ambiguous: younger firms may be more tax avoiders because they may have more
competitors, may be struggling to make a profit or may view tax avoidance as a way to
cut costs. They may also rely on external financing, which could cause them to be more
tax compliant.









164 M.A. Omri and I. El Aissi












3.6 The profile of the external auditor
Although the audit mission is of legal order, it is exercised in the setting of a contractual
relation compared to an agency relation. Some authors appraise (Watts and Zimmerman,
1986) that the auditor could develop opportunist behaviour in order to enter in a relation
of cooperation with the manager.
In literature, the firms, which are visited by some auditors belonging to some BIG 5,
have more tendencies to manage their earnings (Becker et al., 1998). However, some
other authors showed that the adherence to some BIG 5 could constitute a brake to the
earnings management (Mohd Nor et al., 2010; Cormier et al., 1998). Mohd Nor et al.
(2010) examined the relationship between fraudulent financial reporting and firms
characteristics audit quality, they found out that audit quality have significant negative
relationship with fraudulent financial reporting.
These contradictory results could be attributed to the fact that the auditor could play
two roles. He could provide some conservative pieces of advice fearing that this
avoidance is assimilated to a fraud and that, therefore, his reputation is blemished. He
can, on the other hand, provide an aggressive idea since he is supposed to have the ability
required in order to minimise the tax respecting as well as the law so as to satisfy his
proxies. The survey carried out by Carcello et al. (1992) revealed that the auditors in the
Anglo-Saxon context offer more than a simple certification of the accounts and behave
like a real counsellor in the service of the firm.
It is estimated, then, that the firms audited by an auditor belonging to an international
cabinet has a tendency to exercise the corporate tax avoidance more than the others, since
he is the best being able to seise the opportunities of avoidance.
3.7 The profitability of the firm
Little literature investigated the impact of the firms profitability on the level of corporate
tax avoidance. Giles (1998), for example, showed that profitable firms tend to be more
regular than the others. Manzon and Plesko (2002), on the other hand, appraised that the
profitable and promising firms have a tendency to exercise the corporate tax avoidance
more than the others. In addition, Lisowsky (2010) showed that tax avoidance is
positively related to profitability. In the same respect, the study of Cai and Qiao (2009)
revealed that the Chinese industrial firms in more competitive environments are more
likely to be engaged in more tax avoidance activities.
Following the same reasoning adopted by the positive accounting theory concerning
the impact of the size on the result of minimisation, the profitable firms are more
appreciable to the political pressures than the others, and carry a bigger tax burden. So, in
order to reduce their tax liabilities, they have more tendencies to exercise the corporate
tax avoidance.
4 Explanatory factors of the corporate tax avoidance: empirical validation
The objective of this survey is to empirically test the hypothesis according to which the
corporate tax avoidance depends on the size, the sector of activity, the ownership
structure, the organisational structure, the age of the firm, the profile of the auditor, and
the profitability of the firm.









The determinants of corporate tax avoidance in Tunisian context 165












The firms sample, the variables measures, the model and finally the results achieved
are presented in the following section.
4.1 The sample of the survey
The initial sample consists of 41 listed Tunisian firms, for one active period from 2001 to
2006. The data is collected from the financial states and some information annexes,
published by the stock market. We excluded, first of all, the firms that benefited from a
particular fiscal particular, and the observations which show that the fiscal income is
superior to the book income, since, in this case, it cannot be considered as tax avoidance
(Frank et al., 2009). The total number of observations rises to 94 observations.
4.2 Measure of variables
In this section, we are going to present at first the variables to be explained and second
the research explanatory variables.
4.2.1 The variable to explain: the corporate tax avoidance
AVOI: The corporate tax avoidance is measured by the permanent gap between the tax
income and the book income. We adopted the same measurement that was conceived by
Frank et al. (2009).
We are going to determine for every firm, and for every exercise:
The gap between the book income and the tax income commonly called: (book tax
gap)
,
it it it
BTG BI TI =
where
BI
it
= the book income of the firm i to the instant t = the net result
it
+ the tax owing
it
TI
it
= the tax income of the firm i to the t instant= (tax owing
it
/ tax rate) NOL
it

NOL
jt
= change in net operating loss carry forward from year t 1 to year t for firm i.
The permanent gap which measures the ampleness of the corporate tax avoidance
it it it
AVOI BTG BTGT =
where BTGT
it
, represents the temporary book tax gap = deferred tax of the firm i to
the instant t / tax rate
Deferred tax / tax rate
it it it
AVOI BTG =
In order to measure the corporate tax avoidance, several researches are founded on the
book tax gap (Hanlon, 2003; Desai and Dharmapala, 2006; Frank et al., 2009). This is
justified by the fact that during the 90s, the growth of the practices of corporate tax
avoidance was accompanied by the growth of this gap (McKinnon and Harwood, 2003;
McKinnon, 2004).









166 M.A. Omri and I. El Aissi












The positive gap between the book income and tax income is partly due to the
corporate tax avoidance. This difference could be divided in two compounds: the
temporary gap and the permanent gap (Plesko, 2003; Desai and Dharmapala, 2006).
The temporary gap emerged when the same expense or the same income is
acknowledged similarly in the accountant system and in the fiscal system but at different
periods. Some researchers showed that the temporary difference reflects the earning
management activity (Phillips et al. 2003; Hanlon, 2003). However, the corporate tax
avoidance is a permanent and definitive reduction of the tax (Desai and Dharmapala,
2006; Frank et al., 2009).
The permanent gap, on the other hand, exists when an expense or an income is
acknowledged in a system but never in another. It is this gap which could be assigned to
the corporate tax avoidance (Desai and Dharmapala, 2006; Frank et al., 2009). So, we
need to calculate the temporary gap which is equal to the tax deferred on the tax rate.
However, when we analysed data, we noted that no firm showed, in its financial
situations, the amount of deferred tax. This can be explained by the fact that the standard
on the deferred tax is not again published and that the firms, though they can take
advantage, do not take their accounts into consideration.
The amount of the corporate tax avoidance will be normalised by the balance of the
capital of every firm and in every exercise. At this level we have to note that we will take
the case only where the book income is superior to the tax income. In the opposite case, it
cannot be considered as corporate tax avoidance (Frank et al., 2009).
4.2.2 The explanatory variable
SIZE. The size of the firm is measured by the natural logarithm of the asset of the
firm to the t instant. It is generally the adopted measurement by the authors studying
the impact of the size on the earning management (Cormier et al., 1998). We
appraise that the ampleness of the corporate tax avoidance increases with the size of
the firm.
SECP. The adherence to a sector of privileged activity will be measured with a mute
variable, which takes 1 if the firm operates in the activities aimed by the first article
of code of incitements to the investments and otherwise 0. We appraise that the
ampleness of the corporate tax avoidance increases for the firms which operate in the
privileged sectors.
OWNE. The ownership structure is a variable which takes 1 if the leader of the firm
possesses an important part of capital, and otherwise 0. Determining if the
involvement is considered as important is not an easy task. Some researchers
consider that the leader could have considerable influence if he possesses more than
20% of capital (Cormier
et al., 1998). By referring to the article 283 of the commercial firms code, which
stipulates that a or several shareholders representing, at least 5% of social capital
could ask for the enrolment of supplementary projects of resolutions in the agenda of
the general assembly. So, possessing at least 5% is considered important. We
estimate that the level of corporate tax avoidance is much higher for the firms
managed by a leader who possesses more than 5%.









The determinants of corporate tax avoidance in Tunisian context 167












SORG. The organisational structure is measured by a mute variable which takes 1 if
the firm is a part of a group and 0 elsewhere (Ahmed, 2004). The organisational
complex structure could influence the behaviour of tax avoidance since it increases
the opportunities of minimisation of the tax burden. So, the level of corporate tax
avoidance is more important for the firms belonging to a group of firms than that for
others.
AGE. The age of the firm is measured by the number of years since its creation. We
appraise that the ampleness of the corporate tax avoidance increases with the age of
the firm.
PAUD. The profile of the auditor is measured by a binary variable, which takes 1 if
the firm is audited by an auditor representing an international cabinet in Tunisia and
0 elsewhere. We expect that the ampleness of the corporate tax avoidance in the
firms audited by an international cabinet is weaker than in others.
PROF. This variable is measured by the ratio of the assets return. In order to
maximise their net result of tax, the profitable firms tend to follow more tax
avoidance practices.
Table 1 Presentation and measures of the variables
Variables Symbols Measurement
Corporate tax avoidance AVOI Pretax book income less taxable income for firm
j in year t less deferred tax expense / tax rate,
Size of the firm SIZE Natural Log of the total asset
Sector of activity SECP Adherence to a privileged sector: 1, otherwise 0
Ownership structure OWNE Entrepreneurial: 1, otherwise 0
Organisational structure SORG Adherence to a group of the firms: 1, otherwise 0
Age of the firm AGE The number of years since the constitution.
Profile of the auditor PAUD Adherence to an international cabinet: 1,
otherwise 0
Profitability of the firm PROF Return on assets
4.3 Presentation of explanatory model of the corporate tax avoidance
Based mainly on the positive accounting theory, economic regulation theory and some
empirical researches conducted by Dyreng et al. (2008), McIntyre and Nguyen (2000),
Derashid and Zhang (2003), Gramlich et al. (2004), Chen et al. (2010), Frank et al.
(2009), Mohd Nor et al. (2010), Lisowsky (2010), Dyreng et al. (2010), Martin et al.
(2008) and Sikka and Willmott (2010), the linear regression equation is displayed as
follows:
0 1 2 3 4
5 6 7


it it it it it
it it it it
AVOI a a SIZE a SECP a OWNE a SORG
a AGE a PAUD a PROF
= + + + +
+ + + +

This linear regression model is using ordinary least squares. This econometric model
aims to identify the micro factors that potentially affect the corporate tax avoidance.









168 M.A. Omri and I. El Aissi












4.4 Results of the research
4.4.1 Univariate analyse
The results of student test represented in Table 2 indicate that the average of the
corporate tax avoidance is slightly higher for the privileged sectors by the code of
incitements to the investments than for the others. However, this difference is not
statistically significant.
Besides, the results reveal that the average of the tax avoidance defers significantly at
10%, with the ownership structure (OWNE). This seems to show that the manager who
possesses an important part of capital has more recourse to corporate tax avoidance
activities in order to maximise the values of his shares after tax. On the other hand, the
average of the corporate tax avoidance, though it is slightly much higher for the firm
belonging to a group, it is not statistically considerable. As for the variable PAUD, the
results attest that the average of the corporate tax avoidance at the firms audited by a
government auditor representing an international cabinet is statistically more significant
than others.
Table 2 The means of the corporate tax avoidance of different binary variable
Characteristics
Average of tax
avoidance of the
group of which the
characteristic is
present
Means of tax
avoidance of the
group of which the
characteristic is
absent
T de student p-value
SECP 0.147 0.126 0.875 0.384
(n = 37) (n = 57)
OWNE 0.148 0.110 1.681 *0.096
(n = 63) (n = 31)
SORG 0.143 0.111 1.189 0.237
(n = 70) (n = 24)
PAUD 0.165 0.105 2.680 ***0.00
(n = 47) (n = 47) 9
Notes: ***Statistically significant at 1%
*Statistically significant at 10%
The results of the correlation test represented in Table 3 reveal that the variable (AVOI)
is significantly and positively correlated to the variables (SIZE, AGE and PROF).
Table 3 Evaluation of the correlation coefficients
TAIL AGE PROF
AVOI Correlation coefficient 0.189*

0.376*** 0.504***
Signification 0.073 0.000 0.04
Notes: ***Statistically significant coefficient at 1%
*statistically significant at 10%
4.4.2 Multivariate analyse
Before testing the multiple regression model, it is necessary to specify the model to be
employed: fixed or random effects. The Hausman specification test is employed here.









The determinants of corporate tax avoidance in Tunisian context 169












The test statistic is lower than the critical value of chi-squared at 10% significance, the
fixed effect is chosen then.
Additionally, when the absence of multicollinearity problems by the variance
inflation factor is checked, it is found out that all the value of VIF does not exceed 10
which proves the absence of multicollinearity.
To deal with the problem of outliers in a regression the robust regression is applied.
The latter uses a weighting scheme that causes outliers to have less impact on the
estimates of regression coefficients. The results reveal that the robust regression produces
about the same coefficient estimates as OLS does. Descriptive analyses reveal that there
are few outliers observations that is why they are not considered while the regression
analysis is done.
To examine the issue of heteroscedasticity, the Breusch-Pagan test is used. This test
showed that there is a heteroscedasticity problem. However, this problem is solved by
applying the regression with robust standard errors for fixed effect.
In order to check the presence of autocorrelation, the Durbin Watson test is used. The
DW statistic is near 2, but no problem of autocorrelation.
The results of the multiple regressions, in Table 4 below reveal that the behaviour of
corporate tax avoidance is explained at 49.4% by the model, which could be considered
as relatively important.
Table 4 Evaluation of the relative parameters of the model
1

Explanatory variable
AVOI model
(t-value)
SIZE 0.389***
(3.769)
SECP 0.017
(0.175)
OWNE 0.039
(0.425)
SORG 0.046
(0.502)
AGE 0.172*
1.856
PAUD 0.123
1.345
PROF 0.678***
6.751
N 94
R
2
0.494
R
2
adjusted 0.451
Breush-Pagan statistic 8.98
Probabilit > chi
2
(0.1100)
Durbin-Watson statistic 1.704
Notes: ***Statistically significant at 1%.
*Statistically significant at 10%.
The variable to explain: corporate tax avoidance (AVOI)









170 M.A. Omri and I. El Aissi












According to the results displayed in Table 4 three variables are significant namely, the
size, the age of the firm and its profitability.
The positive sign of the variable SIZE allows validating the positive link between the
behaviour of corporate tax avoidance and the size of the firm. This constitutes a
validation of the hypothesis of the political costs of the positive theory, which stipulates
that the firms of big size have a tendency to minimise their result.
As for the effect of the adherence to a privileged activity sector, the results show that
the coefficient of regression of the variable SECP is not statistically significant. This
could be due to the measurement being used: it is necessary to distinguish, here, between
the sector of adherence and the sector being object of investment. For example the
adherence to the financial sector does not permit the firm to benefit from a fiscal
particular advantage, but the investment done by this same firm in an activity aimed by
the code of incitement gives the right to deduce the reinvested profit.
The mute variable (OWNE) is not significant. This could be justified by the fact that
both managerial and entrepreneurial firms can exercise the corporate tax avoidance if the
remuneration for their leader is tributary of net result. Erickson et al. (2004) studied the
features of some firms accused of fraud accountant, and demonstrated that the system of
remuneration of leader has a significant impact on the fraudulent behaviour.
In another context, the regression coefficient of the organisational structure (SORG)
is not significant as well. This may be due to the fact that the parent company of the
group could decide upon the regime of result integration, which consists in making the
algebraic sum of the tax income of the different firms, members of a group. It is on this
embedded income that the tax will be acquitted. So, the firms, members of this group,
could not resort to minimise their tax income by benefiting from some fiscal advantages,
since it is sufficient that one firm, being a member in the group, showing a deficit that the
global result is minimised. Actually, most of the quoted firms are not parent companies
but members of a group, and the tax avoidance will not be exercised at the level of the
firm, member of a group, but rather at the level of the parent company. The latter can
seek to oppress the result of a firm, by different techniques such as the transfer pricing
until the result shows a deficit. Ahmed (2004) showed that a group could minimise its tax
liabilities through the transfer pricing and tunnelling.
The explanatory power of the firm age (AGE) is significant, at 10%. This result
confirms the idea according to which the ampleness of the corporate tax avoidance
increases with the number of activity years. Indeed, from one year to another, the firm
acquires the latitude of seising opportunities of corporate tax avoidance. This result
rejoins that of Ahmed (2004) which showed that the positive link between the age and the
minimisation of the tax liabilities seems to be valid mainly at the first years of the firms
lifespan.
It is noteworthy that the results of the regression model reveal that the profile
regression coefficient of the auditor (PAUD) is not statistically different from zero. The
positive sign of this coefficient shows, however, that the firms audited by an auditor
belonging to an international cabinet have more tendencies to exercise the corporate tax
avoidance, since they have the expertise required in order to seise the loopholes and the
opportunities. The non significance of this tendency can also be explained by the mistrust
of the auditors to the avoidance, notably after the enactment of the code of right and
fiscal procedures which states that the auditor assumes the responsibility in case of fiscal
fraud. So, fearing that it is assimilated to an illegal avoidance and therefore to a fiscal
fraud, the auditors, and mainly the representatives of an international cabinet, have a









The determinants of corporate tax avoidance in Tunisian context 171












tendency to be more rigorous in the respect of the fiscal rules especially after the scandal
of Enron who blemished the reputation of some international cabinets.
The results show that the profitability of the firm (PROF) and its prosperity play a
major role in the demonstration of fiscal behaviour. Indeed, the positive sign of the
coefficient, significant at 1%, shows that the ampleness of the corporate tax avoidance
increases with the profitability of the firm. Accordingly and in order to be profitable, it is
necessary to be organised efficiently in all the fields including the fiscal one.
5 Conclusions
Following the adherence of Tunisia to the Worldwide Trade Organization and its
engagement to enter the zone of free exchange, there was an abolition of customs duties;
it becomes crucial to count on the other feeding sources of the states budget: the income
tax.
Tax avoidance is the most difficult problem in developing country. In fact, this
behaviour may damage the economic growth of the state and further its firms. By
examining the determinants of corporate tax avoidance, this study tends to guide fiscal
authorities so as to optimise fiscal revenue by minimising the corporate tax avoidance
practice.
This work, however, does not mean to reach the conceptualisation of an explanatory
model of corporate tax avoidance behaviour but merely attempts to focus on the features
of the firm which are disposed to encourage such behaviour.
On the light of the results achieved from 39 Tunisian listed firm samples, it is
concluded that the size, the age and the profitability of the firm are the main features of
corporate tax avoidance. This result may lead to ask whether the firm which are supposed
to contribute to the budget of the state with the highest part, actually do it.
This raises the problem of the firms contribution to the state budget.
However, one should be careful when generalising these observations because of the
research limits. One of them which can be evoked refers to the measurement of the
chosen variables.
In order to measure the corporate tax avoidance the book-tax differences is
constructed by adopting the methodology conceived by Frank et al. (2009). It is
conceivable that book tax difference and tax avoidance are not exactly the same because
tax avoidance can have many forms (Dyreng et al., 2008).
Besides, the use of the binary variable is not appreciated. Indeed, it does not permit
really a seising of the sense of the relation. It is, on the other hand, desirable to determine
a quantitative measurement of the studied phenomenon.
This survey constitutes a little contribution to the literature on the behaviour of
corporate tax avoidance and can serve as a starting point for some other later studies in
the Tunisian context.
Showing the significant impact of some characteristics of the firm on the corporate
tax avoidance would be interesting in the Tunisian context for several reasons. First it
allows the investors to detect the firms ability to practise tax avoidance which increases
with the size of the firm, its age, and its profitability.
Second, the examination of the determinants of the corporate tax avoidance will help,
through its results and its findings, authorities develop some fiscal strategies aiming to
reduce the corporate tax avoidance activity. In addition, this study permits to









172 M.A. Omri and I. El Aissi












conceptualise a model of the shelter behaviour of some firms, a topic which, in our
opinion, has not been until now dealt with.
To sum up, it would be interesting to enlarge the survey by shedding light on the
cultural, environmental, and sociological factors which can also influence the tax
avoidance behaviour.
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Notes
1 Robust regression, on the other hand, deals with the problem of outliers in a regression.
Robust regression uses a weighting scheme that causes outliers to have less impact on the
estimates of regression coefficients. Hence, robust regression generally will produce different.
Descriptive analyses reveal that there are few outliers observations that is why we decide to
ignore them when doing regression analysis.