Information system and corporate income tax enforcement: Evidence from China |
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| Affiliation: | 1. School of Business, Hohai University, Nanjing, Jiangsu 211100, China;2. School of Economics, Nanjing University, Nanjing, Jiangsu 210093, China;1. Accounting Department, Xiamen University, China;2. School of Business, Central South University, China;3. School of Management, Xiamen University, China;1. School of International Development, University of East Anglia, Norwich, NR4 7TJ, UK;2. International Institute of Social Studies (ISS), Erasmus University Rotterdam, Kortenaerkade 12, 2518 AX, The Hague, The Netherlands;1. University of Sao Paulo, Brazil;2. Metropolitan College, Boston University, USA;1. Edmund Walsh School of Foreign Service, Georgetown University, 3700 O Street, NW, Washington, DC 20057, United States;2. Edmund Walsh School of Foreign Service and Department of Government, Georgeto wn University, 3700 O Street, NW, Washington, DC 20057, United States |
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| Abstract: | This paper adds the literature by investigating the effect of information system on corporate income tax (CIT) enforcement. We exploit the regional variations generated by the implementation in 2013 of the third stage of the China Tax Administration Information System (CTAIS-3) pilot. The CTAIS-3 is a nationally unified information system that significantly reduces information asymmetry between different tax authorities across regions. We find that the CTAIS-3 pilot significantly reduced firms’ conforming and non-conforming tax avoidance. The enhanced tax enforcement is particularly prominent if a firm is of a smaller size, or is administrated by the State Administration of Taxation, or is a non-state-owned enterprises, or locates in cities with a higher level of local fiscal pressure. Furthermore, we show that the CTAIS-3 improved the CIT enforcement by deterring firms from underreporting accounts receivable, as well as over-reporting accounts payable, inventory and the number of employees. In general, it would be more difficult for firms to hide profits from tax authorities under the CTAIS-3. |
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| Keywords: | Information China tax administration information system Corporate income tax Tax enforcement H25 H26 L86 |
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