Accounting and tax fraud through invoiceless sales: are shareholders loans the visible trace of the underlying money laundering? A study for the portuguese case
Conference Paper
Overview
Research
View All
Overview
abstract
The current study tests whether there was an empirical and positive relation
between shareholders loans increases recorded in companies’ books and the
invoiceless sales they made, i.e. whether such loans were a vehicle adopted for
“laundering” the proceeds of this accounting and tax fraud. The empirical evidence supports the ex-ante expectation of such a positive relation. It suggests that at least a part of those loans is related to accounting and tax fraud, and these loans are the vehicle for ”laundering” the proceeds of non recorded
transactions and, simultaneously, keep the involved companies financially solvable. The current study makes four main contributions to the literature. Firstly, it brings a novel perspective to the accounting and tax fraud scarce literature, that is not the usual context related to imports and exports activities; secondly, it shows that in the particular context described in the paper shareholders loans are used as a way of “laundering” the proceeds of invoiceless sales, and to keep companies solvable; thirdly, it connects the earnings management literature to the literature on fraud, also a novelty; fourthly, based on a sample of southern European unlisted companies, the study also makes a contribution to the yet scarce literature on these firms, namely by bringing information about the way tax evasion evolves in this region.
