Abstract:
Tax avoidance has become a prominent strategy employed by large firms to
enhance their competitiveness and market dominance (Sorbe & Johansson,
2017), prompting further investigation into the role of auditors in shaping tax
avoidance behaviour. The study examined the relationship between auditor
quality, market concentration and tax avoidance in Ghana as well as the
moderating effect of ownership structure. With data from 15 non-financial firms
listed on the Ghana Stock Exchange from 2012 to 2021, the system generalised
method of moment estimation technique was employed. The study found that
auditor quality has a significant positive effect on tax avoidance. Moreover,
market concentration was found to have no significant effect on tax avoidance.
Additionally, the study revealed that ownership structure moderates the
relationship between auditor quality and tax avoidance. Also, ownership
structure has a moderating impact on the relationship between market
concentration and tax avoidance. Based on the findings, the study concludes that
firms engage in tax avoidance practices, as evidenced by their effective tax rate
being lower than the statutory rate. Policymakers and tax authorities should
strengthen tax regulations and enforcement measures. This can include closing
loopholes such as profit shifting and implementing stricter penalties for tax
avoidance. Furthermore, policymakers should ensure a strong ownership
structure and information sharing between investors and auditors to address tax
avoidance issues. Investors with significant ownership stakes should use their
influence to advocate for responsible tax practices among their investment
companies, particularly in industries with high market concentration.
