The impact of the accounting and taxation environment on Lithuania international trade

Abstract

<p>The present research aimed to test the impact of the accounting and tax environment on international trade using the gravity model in the case of Lithuania. Various researches discuss that the accounting and taxation environment is important for business development in a country. Also, international trade is growing in a global world and here business faces some risks when searching for new markets to export goods. Wrong decisions in international trade can lead to a lost of financial resources for business. For this actuality, we wanted to find out what is the impact of the accounting and taxation environment on international trade. The methodology we have used includes the gravity model, which allows us to measure different factors that influence international trade. In the present research, we use traditional variables such as gross domestic products (GDP), population size, distance, and membership in the European Union (EU), as well as specific variables such as – application of international financial reporting standards (IFRS), sustainable development goals (SDG) index, corporate tax rate, and international trade tax. Our research is based on data for 2018–2022 collected from the Lithuanian official statistics, the World Bank, the Centre d'Études Prospectives et d'Informations Internationales (CEPII), the Tax Foundation, the IFRS Foundation, and the Sustainable Development Report portal. The main results of the research methodology developed highlight several important aspects. First, from the perspective of accounting and tax discipline, we can discuss how important the accounting and taxation regulary environment in countries is for global business development. Second, it allows companies to analyse and select the right market to export their products and reduce financial risk. Third, it provides insights for policymakers who seek to increase international trade by creating more attractive country environments for business through accounting and tax regulation. The present research opens new discussions in this area for future research.</p>