Tax avoidance levels of South African listed companies : a comparative analysis of single versus composite effective tax rate (ETR)

The primary objective of this study is to evaluate the effectiveness of using single ETR measures versus a composite score derived from multiple ETR measures in assessing corporate tax avoidance among companies listed on the Johannesburg Stock Exchange (JSE). By comparing the performance of individual and composite ETR metrics, this research aims to determine which approach provides a more accurate, reliable, and valid depiction of corporate taxpayers' tax avoidance levels. The study employs a quantitative research methodology, analysing financial data from JSE-listed South African companies over a 21-year period (2004-2024). Four ETR measures - GAAP ETR, Cash ETR, CFMA, and CFMB - are calculated on both an annual and long-run (3-year average) basis. A composite ETR score is developed by integrating these individual measures, both the annual and long-run. Descriptive statistics, Principal Component Analysis (“PCA”) and Bland-Altman plots are utilised to assess the validity of the composite score and compare its performance against single ETR measures. The sample excludes non-resident firms and those in the financial services sector to ensure data quality and consistency.<br><br><br><br><br>