Prevalence of an Earnings Management Process Aimed at Reducing Corporation and Individuals Tax Liabilities

Abstract

Tax evasion and avoidance have plagued society for centuries. In response, tax authorities have been developing and implementing tax codes to combat this issue, which significantly impacts tax revenue. As a result, governments have struggled to provide essential public goods and services due to deficits in tax revenue. The objective of this study is to examine a selection of 30 research papers published between 2009 and 2025 that focus on tax evasion and avoidance. This review will highlight the prevalence of earnings management practices designed to minimize both corporate and individual tax burdens. The papers analyzed will serve as secondary data for the research. I will employ a Systematic Literature Review methodology to explore various themes such as transfer pricing, exploitation of loopholes in tax codes, illicit financial flows amongst many themes. The findings indicate that tax evasion and avoidance are widespread in many countries. This prevalence hampers governments' ability to provide vital infrastructure and education for their citizens. This research aims to offer valuable insights for management, auditors, and tax authorities, assisting them in identifying and addressing weaknesses in their internal controls and audit processes. Such insights will aid in the prevention and detection of tax avoidance and evasion practices.