A Study On The Tax Risk：Based On The Internal Control

On May5,2009, China’s State Administration of Taxation (SAT) announced thefinal Guidelines on Tax Risk Management for Large Enterprises (Trial)(CircularGuoshuifa [2009] NO.90) to help these enterprises to establish tax risk managementsystems. This is the first time that tax risk is proposed independently and officially,which caused a sensation in academic and in practical. As an integral part of financialrisk that enterprise faced，tax risk should not be ignored. If the enterprise can’t handle itproperly, it could cause economic loss, reputation damage, even bankrupt. In recentyears, many large companies fall into tax scandal due to neglect of tax risk. Thus, howto reduce tax risk and improve abilities on preventing tax risk has become an importanttopic of scholars. Factors have been found related to tax risk, and internal control is akey factor which has imperative influence on tax risk. However, there exist a fewarticles focus on the relationship between internal control and tax risk. Regarding this asa base point, this thesis takes use of the method of criterion and demonstration researchto discuss the role of internal control on guarding against tax risk.This thesis is divided into five parts. The first part introduces existing researches oftax risk and internal control, the frame structure and innovations. The second part is thetheoretical basis. This section defines the tax risk and summarizes the expression andthe measurement methods of tax risk, and describes the theoretical basis of tax risk andinternal control. The third part analyzes the relationship between the effectiveness ofinternal control and tax risk. Then the research hypotheses are put forward. In this part,tax risks are divided into two parts: the risk of tax penalty and the risk of aggravated taxburden. After that, we discuss the correlation of the realization extent of internal controlobjective and the internal control quality with the two sets of tax risk respectively. Thefourth part is the empirical research, which tests the relationship between internalcontrol quality and tax risk after we structure an objectives-oriented internal controlevaluation index system and select real estate enterprises from2009to2011as studysamples.At last, the conclusion of ordinary least squares estimation are draw:(1) internalcontrol obviously effects the tax risk of an enterprise. In other word, an effectiveinternal control system benefits to control the tax risk;(2) the realization extent of internal control objective is prone to positively correlate to tax risk;(3) tax risk dependson other factors more than just internal control, such as enterprise scale, asset-liabilityratio and asset intensity. According to the result of the research above, this thesis alsoputs forward suggestions to prevent and reduce tax risk.After summarizing the conclusions, some suggestions are put forward to contributeto control tax risk:(1) Paying more attention to the extent of the realization of the majorobjectives of the internal control;(2) Strengthening internal control systems of filmsincluding building benign internal environments, enhancing evaluating systems of taxrisk, setting effective communication system and introducing tax risk preventionmechanisms to internal supervision.