Abstract:
Tax evasion is a serious problem in both developed and developing
countries. In our study, we want to show that banking outreach and the depth and
quality of credit information systems play an important role in decreasing both tax
evasion occurrence and tax evasion degree. Based on the data and methodology
used in the study conducted by Beck et al. (2014), in this thesis, we tried to
replicate and extend the scope of the research. Given the global trend of data
localization, we want to contribute to the scholarly literature by investigating the
impact of localization reforms on both the degree and occurrence of tax evasion.
The laws on data localization often require companies to store commercial data
locally (Panday 2018). According to Bauer et al. (2016), an analysis of 21 EU
member countries' laws on data localization shows that these restrictions apply to
commercial data such as transaction records, accounting records, and tax
documents. Our results show a significant effect of localization reforms on tax
avoidance, decreasing both the tax evasion rate and its occurrence. Moreover, our
study found that the participation of foreign investors in external auditing
decreases tax evasion