Corporate tax avoidance and corporate financialization: The moderating effect of managerial myopia

The purpose of this paper is to investigate whether managers with tax avoidance motivation also engage in corporate financialization. Using a large sample of Chinese A-share non-financial listed firms from 2009 to 2020, the empirical results show that there is a positive association between corporate tax avoidance and corporate financialization. Moreover, the positive effect of tax avoidance on corporate financialization mainly manifests in firms with myopic managers. Our results are robust to alternative measures of both tax avoidance and managerial myopia. Two-stage least squares (2SLS) regression and propensity score matching (PSM) confirm our results and mitigate any potential endogeneity issues. Overall, we show that the agency costs between shareholders and managers indeed play a critical role between tax avoidance and corporate financialization.     

Formula Apportionment: Factor Allocation and Tax Avoidance

This paper addresses the question of how firms react to tax incentives in a formula apportionment (FA) tax regime. Under FA, the profits of all consolidated entities of a business group are summed and then allocated according to a formula based on FA factors. We hypothesize that firms may change the allocation of real production factors and/or manipulate the FA factor through tax avoidance strategies. Analyzing FA tax effects of the German local business tax with payroll expense as the exclusive FA factor, we find empirical evidence consistent with both hypotheses. Regarding the allocation of production factors, we observe significant tax effects on labor input at the intensive margin but not on labor input at the extensive margin. In addition, we find evidence of an indirect FA spillover effect on capital investment. Our findings on tax avoidance proxies are consistent with tax-induced manipulations of payroll expense as an FA factor to save tax payments.     

税收规避能够提升企业价值吗？——基于货币政策视角的研究

基于我国特殊制度环境,本文考察了不同货币政策下企业税收规避对其价值的影响机理。研究发现：不同的外部经济政策环境会改变企业税收规避影响企业价值的作用途径。具体而言,货币政策宽松时期,投资者将企业税收规避行为视为存在代理问题的信号,由此对企业价值给予较低评价;货币政策紧缩期,合理的税收规避行为可作为一种替代性的内源融资方式缓解企业潜在的融资约束问题,并且投资者将实际税负的降低解读为一种企业价值增加的信号;进一步的分析表明货币政策通过影响企业融资约束程度进而影响企业税收规避和企业价值的关系。     

Social trust environment and firm tax avoidance: Evidence from China

We examine the impact of the social trust environment in which a firm is located on its tax avoidance in China and paying attention to the moderating effect of corporate governance and state-ownership. Drawing from theoretical and empirical work on firm tax avoidance and manager–shareholder agency conflict, we hypothesize that social trust can lower firm tax avoidance. It is because a high social trust environment can reduce agency conflict so that tax avoidance is less. Our findings are consistent with our hypothesis, and robust to a battery of robustness tests. Furthermore, we document that the association between social trust and firm tax avoidance is more pronounced for firms with weak corporate governance and state-owned. Moreover, we find that firms in more trustworthy provinces present less general and administrative expenses and higher asset turnover, corroborating our theoretical foundations with respect to agency cost in our hypothesis. Our findings suggest that social trust and its interactions with corporate governance and state ownership are important internal and external determinants on the variations in tax avoidance.     

The impact of supply chain quality management practices and knowledge transfer on organisational performance: an empirical investigation from China

In recent years, both quality management practices (QMP) and knowledge transfer (KT) have been studied extensively from inter-organisational and intra-organisational perspectives. However, to the best of our knowledge, the interaction between QMP and KT in a supply chain and their joint effects on organisational performance have not been addressed fully. The purpose of this paper is to provide insights for improving performance by mapping the relationship between supply chain quality management practices (SCQMP) and KT. A survey of 157 Chinese manufacturing firms is used to test a conceptual model that proposes relationship among SCQMP, KT and organisational performance (including operational performance and innovation performance). Structural equation modelling reveals that internal QMP have significantly positive effect on internal KT, while QMP at supply chain level have highly positive effect on cross-organisational KT. Furthermore, the results show that both internal KT and cross-organisational KT can promote operational and innovation performance, although the influence from internal KT is much more significant than cross-organisational KT for Chinese firms. The findings contribute to theory as well as practice by increasing understanding of how to improve the operational and innovation performance through enhancing SCQMP and KT.     

Write-offs and Profitability in Private Firms: Disentangling the Impact of Tax-Minimisation Incentives

Private firms are likely to use the financial reporting process more for other objectives, such as tax savings, than for communicating performance. However, observing firms choosing accounting policies for tax-minimisation purposes is not straightforward due to (i) tax and non-tax costs of reporting lower income (ii) accounting policies that result in lower reported income and no tax savings but generate non-tax benefits (iii) preparers' multiple incentives and (iv) econometric issues. We observe a large sample of 20,505 private firms writing off assets in two separate regimes, one that generates tax savings and one that does not. Firms significantly decrease, but continue to use, write-offs after the adverse change in tax treatment of write-offs. The exogenous tax change should not affect other reporting incentives. This allows us to disentangle the tax-minimisation incentive from other (un-observable) incentives, including debt contracting, dividends and employee relations that contribute to the observed anomalous positive relationship between write-offs and profitability. We show that for private firms (i) obtaining tax savings is important overall (ii) non-tax costs and benefits are probably also important and (iii) earnings informativeness for future cash flows increases after the adverse tax legislation change.     

The Provision of Tax Services by Incumbent Auditors and Earnings Management: Evidence from Korea

This study examines the associations between the provision of tax services by incumbent auditors and earnings management. We investigate whether three different effects of tax service provision play different roles in accounting practices. The three effects include the audit independence effect, the knowledge spillover effect, and the tax avoidance effect. If the provision of tax services by incumbent auditors harms auditor independence, firms may exercise greater earnings management (audit independence effect). However, if incumbent auditors gain incremental knowledge by offering tax services, the quality of their audit services could be enhanced, and therefore, reported earnings could be more conservative (knowledge spillover effect). If tax service fee leads to low taxable income, it could depress book income when book-tax conformity is high (tax avoidance effect). We find that the provision of tax services generally improves earnings quality by curtailing opportunistic accounting practices. The results also suggest that the negative association between the provision of tax services and discretionary accruals seems to be primarily driven by the knowledge spillover effect as opposed to the tax avoidance effect. Additional analysis is conducted in examining whether the tax avoidance effect exists in a sub-sample.     

It is not a flat world after all: Tax repatriation costs and cash value

US corporations have accumulated record‐high amounts of cash, and most of it is trapped in foreign accounts. This study tests the hypothesis that the marginal value of cash decreases in the presence of tax repatriation costs, as these costs are a strong indication that part of the cash is trapped abroad. Cash abroad is not readily available to the company because it is subject to an additional layer of tax before it can be used or distributed. Moreover, uncertainty surrounds the potential use of foreign cash, and research documents that firms holding high amounts of cash abroad are likely to invest in negative net present value activities. Finally, possible changes in tax regulation are an additional source of uncertainty. Consequently, foreign cash should be worth less than domestic cash. Using a large sample of US firms drawn from COMPUSTAT during the 1991–2012 period, the analysis suggests that shareholders value an extra dollar of cash at $1.086. However, this result changes dramatically when the change in cash is interacted with the tax cost of repatriating the earnings. That is, the marginal value of cash decreases significantly in the presence of tax repatriation costs, and shareholders discount cash when it is likely to be held abroad. This study contributes to the literature on cash holding by investigating whether tax repatriation costs affect the value of corporate cash. Moreover, the findings show that there are important economic consequences linked to the phenomenon of cash accumulation in foreign countries and therefore provide regulators with a sound foundation on which to take additional actions to require more disclosure of and transparency in the actual location of firms’ cash holdings.     

Tax Competition with Heterogeneous Firms

Abstract

This paper studies tax competition in an economic geography model that allows for agglomeration economies with trade costs and heterogeneous firms. We find that the Nash equilibrium involves a large country charging a higher tax than a small nation. Lower trade costs lead to an intensification of competition, a drop in Nash tax rates and a narrowing of the gap. Since large, productive firms are naturally more sensitive to tax differences in our model, large firms are the crux of tax competition in our model. This also means that tax competition has consequences for the average productivity of big and small nations' industries; by lowering tax rates, a small nation can attract high-productivity firms.     

Market liberalization and tax avoidance: Evidence from the Shanghai-Hong Kong Stock Connect Program in China

This study employs two market liberalization programs in China, the Shanghai-Hong Kong Stock Connect (SHSC) program and the Shenzhen-Hong Kong Stock Connect (SZHSC) program, as an exogenous shock to stock market liberalization to explore the impact of market liberalization on tax avoidance. By employing the staggered difference-in-difference regression on Chinese listed firms, we found that market liberalization reduces tax avoidance by approximately 13.1%. This result is robust under parallel trend examination, falsification test, alternative regression methodology, and different measurements for tax avoidance. Additionally, this effect is greater for non-state-owned firms and for firms that have less external monitoring, higher information asymmetry, and stronger financial constraints.     

Debt Maturity and Tax Avoidance

This study proposes and empirically tests the argument that creditors are likely to extend debt with a shorter maturity to tax-avoiding firms so that they can frequently re-evaluate tax-related risk in debt contracting. Using effective tax rates and uncertain tax benefits as a proxy for tax avoidance, I find that tax-avoiding firms have a larger proportion of short-maturity debt compared to other firms. The empirical findings further show that firms with unsustainable tax positions and with subsidiaries in tax-haven countries are more likely to employ short-maturity debt. Collectively, the empirical findings suggest that frequent debt renegotiations increase the exposure of tax-avoiding firms to credit supply shocks, contributing to their higher demand for cash.     

Lobbying and tax competition in an oligopolistic industry: a reverse home-market effect

This paper studies tax competition between two asymmetrical countries for an oligopolistic industry with many firms. Each government sets its tax rate strategically to maximize the weighted sum of residents’ welfare and political contributions by owners of firms. It is shown that if the governments care deeply about contributions and trade costs are low, the small country attracts a more than proportionate share of firms by setting a lower tax rate. The well-known home-market effect, which states that countries with a larger market attract a more-than-proportionate share of firms, may be reversed as a result of tax competition by politically interested governments.     

Firm-level determinants of tax evasion in transition economies

Business tax evasion is an important issue for governments. Yet the factors that determine business tax evasion have not been sufficiently examined in the literature in general, and in transition contexts in particular. To address this gap, this study uses the WB/EBRD Business Environment and Enterprise Performance Survey (BEEPS) database with a sample of over 12,692 firms from 26 transition economies. Applying various modelling strategies, we argue that tax evasion is a function of firm-level and institutional-level variables. We contribute to the literature by providing robust evidence showing that the perceived tax burden has a positive impact on tax evasion. We also find that the tax evasive behaviour of firms is positively influenced by low trust in government and in the judicial system as well as by higher perceptions of corruption and higher compliance costs. We find that smaller firms, individual businesses and firms in sectors that are less visible to the tax administration are more likely to get involved in evasive behaviour. Overall, institutional factors play an important role in determining firms’ tax evasion behaviour in transition economies. This finding has important policy implications.     

The effects of public support schemes on small and medium enterprises

In this paper we will investigate the effects of direct grants and tax incentives on recipient small and medium enterprises (SMEs). Direct grants and tax incentives are two different public instruments used to correct market failure and facilitate innovation through lowering the cost of R&D. Although large and small firms innovate in different ways, so far limited empirical evidence has been reported with respect to the effectiveness of public R&D instruments for SMEs. Our data suggests that direct subsidies used alone or with tax incentives strengthen the R&D orientation of the SME as well as some aspects of innovation output and absorptive capacity. Although the effects of policy measures are significant when comparison is made to firms that did not use any of the two instruments, not much difference is found when users of direct grants are compared to those who used both the grants and the tax incentives. This result indicates the existence of limitations in the use of tax incentives by SMEs, and thus suggests that subsidies may be the primary instrument in SMEs.     

财政双向失衡、地方税财治理与企业避税分化

以我国A股上市区公司微观与30省区市的宏观进行匹配得到的面板数据为样本,通过构建双向固定效应模型和面板联立方程模型,就财政双向失衡对企业避税的影响路径进行实证。研究表明：我国同时存在较高的双向失衡,财政纵向失衡促进企业避税,财政横向失衡抑制企业避税。从传导路径来看,财政纵向失衡通过降低地方税收征管和政府补助强度促进企业避税,财政横向失衡通过提高地方税收征管和政府补助积极性抑制企业避税;从地区分化来看,东部地区与全样本结论一致,但在非东部地区,财政纵向失衡、横向失衡与企业避税均负相关,这主要是因为中西部地区企业减少避税能换来更多的政府补助;从地方政府债务规模分化来看,财政纵向失衡与横向失衡对企业避税的影响均在债务规模低的地区成立;从企业自身现金流分化来看,纵向失衡与企业避税的促进关系在现金流低组中成立,而横向失衡与企业避税的抑制关系在现金流高组中成立。     

浅析会计制度对企业所得税税收筹划的影响

税收筹划是指纳税人在税法规定许可的范围内,通过对经营、投资、理财活动的事先筹划和安排,尽可能地取得节约税收或成本的税收收益。税收筹划应具备"三性"合法性、筹划性和目地性。对于"偷税",世界各国认识较一致,面对"避税"和"税收筹划",又有区别。前者虽然不违法,但属于钻税法的空子,有悖于国家的税收政策导向,后者是完全合法的,甚至是税收政策予以引导和鼓励的。     

Corporate restructuring and incentive effects of leverage and taxes

Recent empirical studies have indicated that mergers are value enhancing, yet the theoretical aspects of merger gains have not been as well explored. This paper presents a theoretical analysis of mergers. In the model of the firm presented, outstanding risky debt gives rise to agency costs of underinvestment which are offset by the benefit of debt-related tax shields. The trade-off specifies the optimal leverage for a firm. Within this framework, we then consider whether and under what circumstances firm value could be enhanced by a merger. Under a fairly broad set of assumptions it is shown that most firm combinations ‘improve’ investment incentives and increase the value of debt-related tax shields. Mergers between optimally financed firms result in a merged firm that is also optimally financed, but such mergers are not synergistic. Nevertheless, firm value may be increased if mergers are undertaken in tandem with a refinancing program to bring the combined firms from suboptimal to optimal debt levels.     

Using input–output models to estimate sectoral effects of carbon tax policy: Applications of the NGFS scenarios

The Network of Central Banks and Supervisors for Greening the Financial System (NGFS) has engaged in scenario analysis that estimates a $200/ton carbon tax would be required to transition to net zero carbon by 2050. Using a $200/ton carbon tax as a base, this paper uses input–output (IO) modeling to generate price and revenue effects of a carbon tax. Results from these models, which can only be interpreted as the short-run, upper-bound effects of the carbon tax policy, imply that in response to a $200/ton tax on CO₂e emissions, carbon-intensive industries, such as agriculture, extraction, transportation, utilities, and chemicals, may experience price increases in the range of 10-30 percent. Other industries will also experience price increases, but to a lesser degree, due to increased input costs associated with the tax. In addition, modeling results also suggest that industries facing elastic pricing regimes may face similar-sized declines in revenues as a consequence of the carbon tax. Rank-ordered impact results from these models can be utilized by bank supervisors and firms to adequately plan for sectoral-level transition risk within their lending and/or investment portfolios.     

外部财务报表审计、内部控制质量与税收激进性

从整合审计角度切入,研究财务报表审计和内控审计由不同会计师事务所承担时企业税收激进性是否降低;接着,以我国内部控制和外部财务报表审计制度规范化为契机,探讨两者是否分别发挥出降低税收激进性这种代理行为的作用以及探讨两者在影响税收激进性方面有何种交互作用。以2011—2015年沪深证券交易所A股上市公司为研究对象,利用多元线性回归方法发现：非整合审计反而让税收激进性上升;高质量的内部控制质量或外部财务报表审计都能独立抑制企业税收激进行为;内部控制质量与外部财务报表审计在抑制企业税收激进性方面存在着相互替代关系。研究结论拓展了公司内外部治理机制对税收激进行为的影响,对有效利用内外部资源管理企业避税有重要的实践意义。     

浅谈企业的合理避税

随着我国市场经济的蓬勃发展,为使得利润最大化,如何降低成本,合法规避各种税金成为摆在企业面前的一个重要课题。本文在尊重税法、依法纳税的前提下,对合理避税的方法作了简要介绍。