UNIVERSITY OF ECONOMICS ERASMUS UNVERSITY ROTTERDAM HO CHI MINH CITY INSTITUTE OF SOCIAL STUDIES VIETNAM THE NETHERLANDS VIETNAM – THE NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS GENDER DIVERSITY IN CORPORATE BOARDROOM AND TAX AVOIDANCE THE EVIDENCE IN HOSE LISTED FIRMS BY DAO THI HAN MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, December 2016 i TIEU LUAN MOI download : skknchat@gmail.com UNIVERSITY OF ECONOMICS ERASMUS UNVERSITY ROTTERDAM HO CHI MINH CITY INSTITUTE OF SOCIAL STUDIES VIETNAM THE NETHERLANDS VIETNAM – THE NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS GENDER DIVERSITY IN CORPORATE BOARDROOM AND TAX AVOIDANCE THE EVIDENCE IN HOSE LISTED FIRMS A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS BY DAO THI HAN Academic Supervisor: Nguyen Thi Thuy Linh HO CHI MINH CITY, December 2016 ii TIEU LUAN MOI download : skknchat@gmail.com ABSTRACT Using data set of 296 publicly listed firms in Ho Chi Minh Stock Exchange from 2010 to 2015, the study analyses the engagement of female board members, also in case of being leader of board and executive manager, on tax avoidance activities, measured by three proxies. The fixed effect regression results indicate gender diversity in boardroom is negatively associated with tax avoidance measured by effective tax rate but chairwomen are more engaged in tax avoidance measured by book-tax difference. As a result, the presence of women in boardroom of HOSE listed firms is important to shareholders who consider about firms’ transparency or profit. iii TIEU LUAN MOI download : skknchat@gmail.com TABLE OF CONTENT LIST OF ABBREVIATIONS.
iv LIST OF FIGURE. v LIST OF TABLE. vi CHAPTER ONE INTRODUCTION. Female labor and pay gap in Vietnam.
Women participation in firm management in Vietnam. Tax avoidance in Vietnam. 7 CHAPTER TWO LITERATURE REVIEW. Gender diversity and corporate governance.
Resource-dependence theory. Gender equality reaction in corporate boardroom. Tax avoidance and corporate governance. Tax avoidance and corporate governance.
Gender diversity in boardroom and tax avoidance. Women’ participation in boardroom and tax avoidance. Chairwomen and tax avoidance. Female executive in boardroom and tax avoidance.
18 i TIEU LUAN MOI download : skknchat@gmail. 19 CHAPTER THREE METHODOLOGY. Data and data source. Robust standard Errors.
27 CHAPTER FOUR EMPIRICAL RESULT. Summary descriptive statistic. Women board directors in HOSE listed firms. Tax expense in HOSE listed firms having women board directors.
GAAP effective tax rate. CASH effective tax rate. Book-tax differences. 38 CHAPTER FIVE CONCLUSION.
41 ii TIEU LUAN MOI download : skknchat@gmail. 43 APPENDIX A SELECTED FIRMS LISTED IN HOSE. 48 APPENDIX B CORRELATION MATRIX. 50 APPENDIX C MULTICOLLINEARITY TEST.
52 APPENDIX D PANEL DATA REGRESSION RESULTS – FEM. 54 APPENDIX E PANEL DATA REGRESSION RESULTS – REM. 59 APPENDIX F HETEROSKEDASTICITY AND AUTOCORRELATION TEST. 64 APPENDIX G REGRESSION WITH ADJUSTED STANDARD ERRORS.
66 iii TIEU LUAN MOI download : skknchat@gmail.com LIST OF ABBREVIATIONS BTD: book-tax different CEO(s): Chief of Executive officer(s) CFO(s): Chief of Finance officer(s) CIT: Corporate Income Tax ETR: effective tax rate EU: European Union FDI: Foreign directed investment FEM: Fixed effect model GAAP: Generally Accepted Accounting Principle GSO: General Statistics Office HNX: Hanoi Stock Exchange HOSE: Ho Chi Minh Stock Exchange ILO: International Labor Organization OECD: Organization for Economic Co-operation and Development REM: Random effect model ROA: Return on asset ROE: Return on equity ROI: Return on investment SG&A: Selling, general and administration VAT: Value-added tax VCCI: Vietnam Chamber of Commerce and Industry VWEC: Vietnam Women Entrepreneurs Council iv TIEU LUAN MOI download : skknchat@gmail.com LIST OF FIGURE FIGURE 1.1 LABOR FORCE PARTICIPATION RATES (%) .2: NATIONWIDE FEMALE EMPLOYED POPULATION .1: THE SCOPE OF CORPORATE GOVERNANCE.1: GRAPH HISTOGRAM OF TAX AVOIDANCE MEASURES.2: GRAPH HISTOGRAM OF CORPORATE BOARD SIZE AND WOMEN MEMBERS .3: HOSE LISTED FIRMS HAVING WOMEN PARTICIPATING BOARDROOM .4: NUMBER OF EXECUTIVE AND NON-EXECUTIVE FEMALE BOARD DIRECTOR .5: CURRENT TAX EXPENSE IN HOSE LISTED FIRMS (BILLION VND) .6: CASH TAX PAID IN FIRMS IN HOSE LISTED FIRMS (BILLION VND). 33 v TIEU LUAN MOI download : skknchat@gmail.com LIST OF TABLE TABLE 1.1: CORPORATE INCOME TAX SINCE 2013 .1: SUMMARY HYPOTHESES AND RESEARCH QUESTIONS .1: SUMMARY STATISTICS OF VARIABLES .2: RESULTS OF FEM WITH TAX AVOIDANCE MEASURED BY GAAPETR .3: RESULTS OF FEM WITH TAX AVOIDANCE MEASURED BY CASHETR .4: RESULTS OF FEM WITH TAX AVOIDANCE MEASURED BY BTD .5: SUMMARY HYPOTHESIS TEST RESULTS. 39 vi TIEU LUAN MOI download : skknchat@gmail.com CHAPTER ONE INTRODUCTION 1. Female labor and pay gap in Vietnam According to Worldbank data, Vietnam keeps a very high female labor participation rate as high as male’s, not lower than 72 percent since 2000, shown in Figure 1.
General Statistics Office (GSO) of Vietnam also reports more than 40 percent of the nationwide labor force are women (see Figure 1. However, the International Labor Organization (ILO) identifies that gender pay gap in Vietnam has been widened. Vietnamese women earn less than men thirteen percent in 2011 and twenty to thirty percent in 2012 while global average gender pay gap is around 17 percent. The latest Labor Force Survey Report (2012) shows that women earn less than male counterparts in all economic sectors, even the favor-female industries like healthcare, social works.
Hence, the remuneration seems to reflect gender of worker instead of content of work. It is clear that the principle of “equal pay for work of equal value” stipulated in the Labor Code need to be implemented.1 Labor force participation rates (%) male rate female rate 100 90 80 70 60 50 40 30 20 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (Source: worldbank.org) 1 (female/male) labor force participation rate = % of (female/male) population ages 15+ having a job 1 TIEU LUAN MOI download : skknchat@gmail.2: Nationwide female employed population 60.000 - 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total Woman % (Source: gso.vn) As one of the key talent pool in total Vietnam labor, the roles and contributions of women to the economic development should be admitted soon rather than the traditional expectation in household responsibility. Madam Nguyen Thi Tuyet Minh, Chairwoman of Vietnam Women Entrepreneurs Council (VWEC) emphasizes that women are the important factor possibly solving international affairs (Women with Business and Gender Equality, 2016). This emerging subject of “Creative women, creative economies,” is discussed in the Global Summit of Women 2015 organized in Sao Paulo, Brazil.
In the conference, many specialists agreed that Vietnamese women with the wisdom, insight and determination in any business or social circumstance are deserved to be promoted to leadership. Women participation in firm management in Vietnam Some representatives of richest and most powerful women in stock market like Ms. Truong Thi Le Khanh (chairwoman cum CEO of Vinh Hoan Company), Ms. Pham Thu Huong, Ms.
Pham Thuy Hang (vice presidents of Vingroup), and Ms. Mai Kieu Lien (chairwoman cum CEO of Vinamilk)… are holding important positions in large corporates. However, the more opportunities women have in career, the more obstacles and pressures women have. Participating in the political or economic activities creates pressure of making decision, influencing male employees, satisfying clients…to women.
Besides, they have to carry out the housewife responsibility with children, husband and her family. Moreover, the expectation to be 2 TIEU LUAN MOI download : skknchat@gmail.com outstanding in appearance, knowledge or behavior is the other pressure to female leaders. Certainly, the long-time process to shorten the gender gap needs efforts of not only trade unions, social organization but also, and most important, female workers themselves to access education, improve skills and overcome glass ceiling2. Internationally, the ILO has worked closely with internal organizations, like Vietnam Chamber of Commerce and Industry (VCCI), to create jobs and reduce poverty.
Under the valuable support of the ILO, women’s economic empowerment is promoted and starts to be guided legally. Some legal tools favor gender equity like Gender Equity Law (2007), the Directive No. 10/2007/CT-TTg of Prime Minister, Decree No. Moreover, Vietnam takes part in global/regional conferences about women to discuss and learn to encourage the engagement and contribution of women in social and economic life.
Recently, in the Global Summit of Woman in 2016, an international forum for women founded in 1990, one of the four breakout sessions of leadership development is “Women on Boards Roundtable: How female board members can drive value and results”. Generally, it is essential to perceive that women prefer to be appointed as leader in business or politics on merit, not in condition of elimination discrimination. Correspondingly, Shoko Ishikawa, Country Representative for United Nations Women in Vietnam, has added on Worldbank news: "We need to highlight role models and positive images of female leaders, and highlight women’s roles in non-traditional jobs such as business leaders, scientists, architects so that we can change perceptions on tasks that women can take on. Tax avoidance in Vietnam In recent years, Vietnam General Department of taxation has improved in policies and procedures that impact positively on the business community.
From 2014 to 2016, the tax declaration and administrative procedures have been simplified gradually to reduce compliance cost and time for business entities. The tax sector has enacted many tax regulations of Government and the Ministry of Finance like Circular No. 92, 96, 110 and 127/2015/TT-BTC and Resolution 19 and 35 on tax administrative simplification and preparing for electronic tax 2 Glass ceiling is invisible but real barrier prevent qualified and deserving employees developed, normally causes by age, ethnicity, political or religious affiliation, and/or sex 3 TIEU LUAN MOI download : skknchat@gmail. Moreover, increasing number of enterprises and enterprises’ competitiveness with reasonable tax rates also helps to acquire capital and ensuring State budget from domestic income sources.
Accordingly, the General Department of Taxation will implement some measures to expand the tax base. A single rate of VAT is one proposal of tax reform. Besides, revenue from land and properties on land has been considered as an important source of State budget in future. Especially, in order to ensure the equality for both domestic and foreign business entities, the tax service has proposed a lower corporate income tax and improving legal framework for transfer prices enforcement.1: Corporate income tax since 2013 Effective time Entities CIT Documents All firms excluding below list 25% Circular 123/2012/TT- Exploration and exploitation oil and gas 32%- BTC issued on operations in Vietnam 50% 27 July, 2012 Before 01 July, 2013 Exploration and exploitation valuable resources operations Vietnam (exclude oil 50% and gas) Mines (70% locations belongs to region 40% difficult economic and social conditions Firms’ revenue less than VND 20 billion 20% Circular 141/2013/TT- Firms’ revenue from VND 20 billion 25% After 01 July, 2013 BTC issued on New established firms since 01 July, 2013 16 October, 25% (excluding tax-favored list) 2013 Firms’ revenue less than VND 20 billion 20% Circular 78/2014/TT- Firms’ revenue from VND 20 billion 22% From 01 January, 2014 BTC issued on New established firms less than 12 18 June, 2014 22% months (excluding tax-favored list) Circular 96/2015/TT- From 01 January, 2016 All firms (excluding tax-favored list) 20% BTC issued on 25 June, 2015 (Source: the author summarized from gdt.vn) 4 TIEU LUAN MOI download : skknchat@gmail.com Corporate income tax (CIT) has been adjusted several times since 2013 as shown in Table 1.
Although the CIT has been dropped 3 percent since 2013 to 2015, many experts agree that total tax expenses that companies must pay are considered very high compared to neighborhood. One of the reasons is Worldbank’s survey results show that Vietnamese business entities have to pay 39.4 to 40 percent of profit for taxes and fees, which includes CIT, land tax, health and social insurance for labors. The results point out a big gap in taxes and fees in Vietnam and Indonesia (29.5 percent), Cambodia (21 percent), and Singapore (18.