The effect of adoption of an electronic filing system in corporate tax on tax avoidance: A case of Mongolian firms

Abstract

This study seeks to analyze the effects of the electronic filing system implemented in Mongolia since 2014 on corporate tax evasion. Furthermore, it investigates if tax evasion tendencies differ based on government ownership status and whether there are variations in such conduct between the manufacturing and non-manufacturing sectors in Mongolia. To attain the objective, a sample of 1,971 Mongolian listed companies from the Osiris database was constructed for the period of 2011 to 2019. The empirical results indicate that the implementation of the electronic filing system has had a statistically significant adverse impact on tax avoidance. This data indicates that the mandate for electronic invoicing and transmission to tax officials reduced the issuance of fraudulent tax invoices by companies, resulting in a significant decrease in their tax avoidance. Additionally, the correlation between the implementation of e-filing and corporate tax avoidance remained consistent regardless of government ownership status. Thirdly, the introduction of the electronic filing system had varying effects on corporate tax avoidance, depending on the manufacturing status of the companies. Manufacturing companies showed a greater decrease in their tendencies to avoid taxes after the implementation of the electronic filing system, which suggests a significant enhancement of transaction transparency for these companies. This study is significant in empirically analyzing the efficacy of Mongolia's electronic filing system. It may serve as empirical evidence for assessing current tax systems, measuring the impact of the electronic filing system, and developing new policies.