Abstract

This study aims to develop a conceptual model demonstrating the predictors and measures for tax management behavior. The study also proposes the mediating role of management accounting systems in the model. A deductive approach was utilized to propose that board effectiveness, managerial competencies, and management accounting systems are predictors of tax management, while strategic responses serve as construct measures for tax management. The underlying mechanisms by which these variables might lead to tax management of both direct and indirect taxes are elaborated using Neo-institutional theory as the major theoretical underpinning. This study indicates that board effectiveness, managerial competencies, and management accounting systems can predict tax management. Moreover, based on Neo-institutional theory, tax management behavior is a response to institutional expectations (demands from tax authorities). This paper provides valuable implications for corporate taxpayers to effectively manage their tax affairs, avoiding fines, penalties, prosecution, and other costs while ensuring sound compliance with laws and regulations. This paper is the first study that explains tax management as a response to tax enforcement pressures. The paper explains tax management using latent variables such as planning, organizing, controlling, and communication, which will be measured using the strategic responses suggested by Oliver. However, this study has some limitations. One limitation is the lack of empirical tests of the proposed model. Another limitation is that only internal organizational dynamics (board effectiveness, managerial competencies, and management accounting systems), are proposed as factors to explain tax management. Other variables related to organizational interests and value commitments could be explored. Additionally, external factors like enforcement measures from tax authorities are likely to affect tax management in organizations.

Key words: Tax management, board effectiveness, managerial competencies, management accounting system.