The Political Dynamics of Corporate Tax Avoidance: The Chinese Experience

• 成果类型: Article
• 署名作者: Chen, Hanwen; Tang, Song; Wu, Donghui; Yang, Daoguang
• 署名单位: Nanjing Audit University; Shanghai University of Finance & Economics; Chinese University of Hong Kong; Chinese University of Hong Kong; University of International Business & Economics
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2017-0601
• 发表日期: 2021
• 页码: 157-180
• 关键词: economic-performance; noncompliance; connections; FEDERALISM; incentives; GOVERNMENT; turnover; audits; MARKET

摘要

In China's political selection system, officials capable of growing local economies are rewarded with promotions. Eager to demonstrate economic achievements, newly appointed local leaders may raise tax revenues to expand fiscal expenditures on infrastructure projects. Against this backdrop, we study how political appointments influence local firms' tax planning. Based on a sample of locally administered state-owned enterprises (SOEs), we find that firms decrease their tax avoidance after new leaders take office. The political-turnover effect on these firms' tax positions is more evident when the incoming leaders have more political clout over SOE managers, the incentives to divert resources are stronger, or politician-manager networks are present, and subsides following the launch of the anticorruption campaign. Furthermore, firms with higher post-turnover tax payments subsequently receive more government contracts or subsidies. Overall, our findings suggest political incentives shape the tax-planning activities of SOE managers in a two-way favor exchange'' manner.