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The impact of fiscal squeeze on corporate tax avoidance behaviors: Evidence from the agricultural tax reform

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  • Zhang, Fan
  • Wu, Guanghao
  • Zhu, Ling
  • Zhang, Wenzhe

Abstract

This paper explores the effect of local fiscal pressure and corporate tax avoidance behavior using the abolish of agricultural tax reform as a quasi-natural experiment. We show that sudden loss of fiscal revenue results in reduction in tax evasion through encouraging firms to improve their productivity. This incentive for tax liability can be strengthened if the firm: (1) located in areas with relatively tough tax enforcement; (2) are non-state-owned enterprises; (3) located in areas where local officials face more promotion incentives; (4) is in highly competitive industries.

Suggested Citation

  • Zhang, Fan & Wu, Guanghao & Zhu, Ling & Zhang, Wenzhe, 2023. "The impact of fiscal squeeze on corporate tax avoidance behaviors: Evidence from the agricultural tax reform," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 890-901.
    • Handle: RePEc:eee:ecanpo:v:79:y:2023:i:c:p:890-901
    DOI: 10.1016/j.eap.2023.07.002
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    Cited by:

    1. Yang, Zhijiu & Ding, Hai, 2024. "Turning a blind eye: How local government fiscal distress affects the entry of energy-intensive enterprises," Energy Economics, Elsevier, vol. 138(C).

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    More about this item

    Keywords

    Fiscal pressure; Corporate tax avoidance; Tax enforcement; Agricultural tax reform;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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