scholarly journals The Unintended Consequence of Land Finance: Evidence from Corporate Tax Avoidance

2021 ◽  
Author(s):  
Tao Chen ◽  
Youchao Tan ◽  
Jinghua Wang ◽  
Cheng (Colin) Zeng
Keyword(s):  
Local Governments ◽  
Tax Avoidance ◽  
The Political ◽  
Political Leaders ◽  
Corporate Tax ◽  
Cross Sectional ◽  
Industrial Firms ◽  
Tax Enforcement ◽  
Land Transfer ◽  
Reduction Effect

Using a large sample of unlisted industrial firms in China, we find that a decrease in local governments’ land transfer revenues leads to lower tax avoidance by firms within their jurisdiction. Our cross-sectional variation tests suggest that the tax-avoidance-reduction effect is stronger in cities with higher land finance dependence and government intervention, as well as where the political leaders have stronger promotion incentives. However, the effect is moderated for politically connected firms. Further analysis reveals that intensified tax enforcement is the mechanism through which land transfer revenue losses result in decreased tax avoidance. Our study offers novel evidence on a previously underexplored determinant of corporate tax avoidance through the lens of land finance. This paper was accepted by Gustavo Manso, finance.

Do IRS Audits Deter Corporate Tax Avoidance?

2012 ◽  
Vol 87 (5) ◽  
pp. 1603-1639 ◽  
Author(s):  
Jeffrey L. Hoopes ◽  
Devan Mescall ◽  
Jeffrey A. Pittman
Keyword(s):  
Tax Avoidance ◽  
Tax Rates ◽  
Coefficient Estimates ◽  
Corporate Tax ◽  
Effective Tax Rates ◽  
Tax Enforcement ◽  
Public Firms ◽  
Large Samples ◽  
Percentage Points

ABSTRACT We extend research on the determinants of corporate tax avoidance to include the role of Internal Revenue Service (IRS) monitoring. Our evidence from large samples implies that U.S. public firms undertake less aggressive tax positions when tax enforcement is stricter. Reflecting its first-order economic impact on firms, our coefficient estimates imply that raising the probability of an IRS audit from 19 percent (the 25th percentile in our data) to 37 percent (the 75th percentile) increases their cash effective tax rates, on average, by nearly two percentage points, which amounts to a 7 percent increase in cash effective tax rates. These results are robust to controlling for firm size and time, which determine our primary proxy for IRS enforcement, in different ways; specifying several alternative dependent and test variables; and confronting potential endogeneity with instrumental variables and panel data estimations, among other techniques. JEL Classifications: M40; G34; G32; H25.

scholarly journals Corporate Tax Avoidance and Debt Costs

2019 ◽  
Vol 42 (2) ◽  
pp. 117-143 ◽  
Author(s):  
Terry Shevlin ◽  
Oktay Urcan ◽  
Florin P. Vasvari
Keyword(s):  
Private Information ◽  
Information Quality ◽  
Tax Avoidance ◽  
Bank Loan ◽  
Bond Yields ◽  
Corporate Tax ◽  
Cross Sectional ◽  
Negative Effect ◽  
Loan Spreads ◽  
Jel Classifications

ABSTRACT We use path analysis to investigate how corporate tax avoidance is priced in bond yields and bank loan spreads. We find that approximately one half of the total effect of tax avoidance on bond yields is explained through the negative effect of tax avoidance on future pre-tax cash flow levels and volatility and, to a lesser extent, lower information quality. The effects of these mediating variables are much less pronounced for bank loan spreads. The results of additional cross-sectional analyses indicate that, relative to bond investors, banks are able to reduce information asymmetry problems more effectively, given their access to firms' private information and greater ability to monitor borrowers. JEL Classifications: G31; G32; M10; O16.

Long-Run Corporate Tax Avoidance

2008 ◽  
Vol 83 (1) ◽  
pp. 61-82 ◽  
Author(s):  
Scott D. Dyreng ◽  
Michelle Hanlon ◽  
Edward L. Maydew
Keyword(s):  
Tax Avoidance ◽  
Tax Rates ◽  
Corporate Tax ◽  
Effective Tax Rate ◽  
Initial Examination ◽  
Cross Sectional ◽  
Effective Tax Rates ◽  
Sample Mean ◽  
Tax Rate ◽  
Long Run

We develop and describe a new measure of long-run corporate tax avoidance that is based on the ability to pay a low amount of cash taxes per dollar of pre-tax earnings over long time periods. We label this measure the “long-run cash effective tax rate.” We use the long-run cash effective tax rate to examine (1) the extent to which some firms are able to avoid taxes over periods as long as ten years, and (2) how predictive one-year tax rates are for long-run tax avoidance. In our sample of 2,077 firms, we find there is considerable cross-sectional variation in tax avoidance. For example, approximately one-fourth of our sample firms are able to maintain long-run cash effective tax rates below 20 percent, compared to a sample mean tax rate of approximately 30 percent. We also find that annual cash effective tax rates are not very good predictors of long-run cash effective tax rates and, thus, are not accurate proxies for long-run tax avoidance. While there is some evidence of persistence in annual cash effective tax rates, the persistence is asymmetric. Low annual cash effective tax rates are more persistent than are high annual cash effective tax rates. An initial examination of characteristics of firms successful at keeping their cash effective tax rates low over long periods shows that they are well spread across industries but with some clustering.

scholarly journals International Tax Avoidance – Introduction

2017 ◽  
Vol 7 (1) ◽  
Author(s):  
Reuven Avi-Yonah
Keyword(s):  
Political Economy ◽  
Tax Avoidance ◽  
The Political ◽  
Eu Law ◽  
Budget Cuts ◽  
Corporate Tax ◽  
Illegal Activity ◽  
The Us ◽  
Eu Commission ◽  
The Eu

Abstract Tax avoidance and evasion is a hot topic. On the evasion (illegal activity by individuals) front, the various leaks culminating in the Panama Papers have once again revealed the scope of evasion by the global elite. Gabriel Zucman conservatively estimated the annual revenue loss at $200 billion. On the tax avoidance (legal activity by corporations) front, the OECD BEPS project has estimated the scope of avoidance by multinationals at between $100 and $240 billion per year. By comparison, total US corporate tax revenues are about $400 billion per year. The articles in this volume reflect various aspects of these troubling phenomena (from the perspective of citizens who pay their tax bills and bear the burden of budget cuts by governments starved of revenues). Yuri Biondi writes from an accounting perspective about the firm as an Enterprise Entity and the tax avoidance conundrum. Matthias Thiemann and Tim Buettner discuss the political economy of the OECD BEPS project. David Quentin discusses tax avoidance in transnational supply chains of multinationals. Blazej Kuzniacki analyzes tax avoidance in EU law, which has been the focus of a lot of activity recently (e. g., the proposed Anti-Tax Avoidance Directive by the EU Commission). Amir Pichhadze and myself discuss the idea of statutory General Anti-Abuse Rule (GAAR) in the US and Canadian contexts.

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