Effects of the Fleuriet model and liquidity ratios on tax aggressiveness

Does the need for working capital and liquidity ratios influence tax aggressiveness? This article investigates If the level of fiscal aggressiveness changes depending on the financial structure of a Company, based on the Fleuriet model for dynamic analysis of the working capital. Tax planning is a way of obtaining resources internally and, according to the hierarchy proposed by pecking order theory, internal resources are the first used by companies to finance their activities. A multiple linear regression model for panel data with fixed company and year effects has been adopted to test the relationship. As a variable of interest, dummy variables were used, one for each type of financial structure proposed by the Fleuriet model. In a sample consisting of 2,142 companies-year listed in B3 between 2010 to 2016, it was found that in both healthier and less healthy companies, there is no significant difference in the level of tax aggressiveness between companies classified according to the structures of the Fleuriet model. However, the additional analyses for the dynamic liquidity ratio and the general liquidity ratio showed that the higher the liquidity, lower is the tax aggressiveness. The findings point out that greater tax aggressiveness can be explained in part by liquidity difficulties.