The Influence of Tax Authority on Corporate Tax Avoidance: Mechanism and Motivation

Jiameng Ma, Sujia Guo

Abstract


In the past, literature about the government's influence on corporate tax burden have studied corporate tax avoidance from the perspective of tax collection and management, while few have examined corporate tax avoidance from the perspective of policy formulation and policymakers. This paper fills this gap. Government is an empty concept, and its policy characteristics are actually the reflection of real core government officials' decision-making. By referring to Bertrand and Schoar (2003), Dyreng, Hanlon, and Maydew (2008), this paper finds that individual factors of financial leadership have a significant impact on the level of income tax rates of companies in their jurisdictions. Furthermore, the formulation of the financial budget is the influence path, including the proportion of local general budget revenue in local GDP, the proportion of local general budget expenditure in local GDP, the proportion of local tax revenue in local GDP, and the proportion of local enterprise income tax in all tax revenue. Finally, this paper finds that the leaders' motivation for their future careers is the influence of corporate tax avoidance. The characteristics that impact corporate income tax are the tenure of the director of finance, age, and whether the next post is promoted to the vice governor or vice mayor.

Keywords


treasurer; corporate tax avoidance; individual characteristics

Full Text:

PDF

References


Bertrand, M., and A. Schoar. 2003. Managing with style:The effect of managers on firm policies. The Quarterly Journalof Economics,68(4):1169-1208.

Dyreng, S., M. Hanlon, and E.Maydew.2008.Long-runcorporate tax avoidance. The Accounting Review,83(1):61-82.

Cheng, C. S. Agnes; Huang, Henry He; Yinghua Li; Stanfield,Jason.2012. The Effect of Hedge Fund Activism onCorporate Tax Avoidance,87(5):1493-1526.

Mcguire S T, Omer T C, Wang D . 2012.Tax Avoidance:Does Tax-Specific Industry Expertise Make a Difference? SocialScience Electronic Publishing, 87(3):975-1003.

Chyz J A, Ching Leung W S, Zhen Li O, et al. 2013. Laborunions and tax aggressiveness. Journal of Financial Economics,108(3):675-698.

Hoi C K, Wu Q, Zhang H. 2013. Is Corporate Social Responsibility(CSR) Associated with Tax Avoidance? Evidence fromIrresponsible CSR Activities. Accounting Review, 88(6):2025-2059.

Gaertner, Fabio B. 2014. CEO After-Tax Compensation Incentivesand Corporate Tax Avoidance. Contemporary AccountingResearch, 31(4):1077-1102.

Gallemore J, Labro E. 2015.The importance of the internalinformation environment for tax avoidance. Journal of Accountingand Economics, 60(1):149-167.

Mcguire S T, Wang D, Wilson R J. 2014.Dual Class Ownershipand Tax Avoidance[J]. Accounting Review, 89(4):1487-1516.

Armstrong C S, Blouin J L, Jagolinzer A D, et al.2015.Corporate Governance, Incentives, and Tax Avoidance.Journal of Accounting and Economics, 60(1):1-17.

Donohoe, Michael P . 2015. Financial Derivatives in CorporateTax Avoidance: A Conceptual Perspective. Journal ofthe American Taxation Association, 7(1):37-68.

Hogan B, Noga T. 2015. Auditor-provided tax services andlong-term tax avoidance[J]. Review of Accounting and Finance,14(3):285-305.

Kubick T R, Lynch D, Mayberry M, et al. 2016. TheEffects of Regulatory Scrutiny on Tax Avoidance: An Examinationof SEC Comment Letters[J]. Social Science ElectronicPublishing, 91(6):1751-1780.

Pastor, L, Pietro, P. 2012. Uncertainty About GovernmentPolicy and Stock Prices. Journal of Finance,67(4):1219-1264.

Baker T, Cook I R, Mccann E, et al. 2016. Policies on theMove: The Transatlantic Travels of Tax Increment Financing[J]. Annals of the American Association of Geographers,106(2):459-469.

Shapiro G J M. 2010. What Drives Media Slant? Evidencefrom U.S. Daily Newspapers. Econometrica, 78(1):35-71.

Hoberg G, Phillips G. 2010.Real and Financial IndustryBooms and Busts. The Journal of Finance, 65(1):45-86.

Boudoukh, Jacob, Ronen Feldman, Shimon Kogan, andMatthew Richardson. 2013. Which News Moves StockPrices? A Textual Analysis.NBER Working Paper 18725.

Alexopoulos, Michelle, and Jon Cohen. 2015. The Power ofPrint: Uncertainty Shocks, Markets, and the Economy.InternationalReview of Economics and Finance,40: 8–28.

Eugene F. Fama. 1980. Agency Problems and the Theory ofthe Firm. Journal of Political Economy,88(2):288-307

Bamber L S, Jiang J, Petroni K R, et al. 2010.ComprehensiveIncome: Who's Afraid of Performance Reporting?. TheAccounting Review, 85(1):97-126.

Ge W, Matsumoto D A, Zhang J L. Do CFOs Have Styles ofTheir Own? An Empirical Investigation of the Effect of IndividualCFOs on Financial Reporting Practices[J]. ContemporaryAccounting Research, 28(4):1141–1179.

An H, Chen Y, Luo D, et al. 2016.Political uncertainty andcorporate investment: Evidence from China[J]. Journal ofCorporate Finance, 36:174-189.

Tang T, Mo P L L, Chan K H. 2017. Tax Collector or TaxAvoider? An Investigation of Intergovernmental AgencyConflicts[J]. The Accounting Review, 92(2):247-270.




DOI: https://doi.org/10.36012/ems.v2i2.2795

Refbacks

  • There are currently no refbacks.


Copyright (c) 2021 Jiameng Ma, Sujia Guo

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.