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Business Groups and Tax Havens

Author

Listed:
  • Weichieh Su

    (National Chengchi University)

  • Danchi Tan

    (National Chengchi University)

Abstract

Setting up affiliated companies in tax havens is a legitimate, but ethically dubious, business practice. This study examines the conditions under which emerging business groups tend to use such a business practice. Business groups in emerging economies have been operating in weak institutional environments with substantial government intervention and ineffective market-supporting institutions. Having offshore companies in tax havens enables the groups to bypass some market transaction costs and institutional constraints, and it also provides them the opportunity to evade taxes and hide illegal conduct, such as bribery. Empirical evidence based on a sample of Taiwanese business groups showed that business groups with a higher level of prosocial orientation established fewer offshore companies in tax havens, as manifested by their commitment of resources to establishing nonprofit organizations. In contrast, groups that have higher levels of product and international diversification tend to use this ethically dubious business practice. However, highly internationalized groups are less likely to do so when they have committed substantial resources to prosocial activities.

Suggested Citation

  • Weichieh Su & Danchi Tan, 2018. "Business Groups and Tax Havens," Journal of Business Ethics, Springer, vol. 153(4), pages 1067-1081, December.
  • Handle: RePEc:kap:jbuset:v:153:y:2018:i:4:d:10.1007_s10551-018-3910-6
    DOI: 10.1007/s10551-018-3910-6
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    Cited by:

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    2. Granda, María L., 2021. "Tax haven ownership and business groups: Tax avoidance incentives in Ecuadorian firms," Journal of Business Research, Elsevier, vol. 130(C), pages 698-708.
    3. Aguilera, Ruth V. & Crespí-Cladera, Rafel & Infantes, Paula M. & Pascual-Fuster, Bartolomé, 2020. "Business groups and internationalization: Effective identification and future agenda," Journal of World Business, Elsevier, vol. 55(4).
    4. Aiastan Anatolievich Matykov & Maksim Evseevich Krivelevich, 2020. "Ways of Enhancing Performance under a Special Economic Regime: Special Administrative Regions," Spatial Economics=Prostranstvennaya Ekonomika, Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences (Khabarovsk, Russia), issue 2, pages 185-202.
    5. Frederick Kibon Changwony & Anthony Kwabena Kyiu, 2024. "Business strategies and corruption in small‐ and medium‐sized enterprises: The impact of business group affiliation, external auditing, and international standards certification," Business Strategy and the Environment, Wiley Blackwell, vol. 33(1), pages 95-121, January.
    6. K. V. Mukundhan & Sreevas Sahasranamam & James J. Cordeiro, 2019. "Corporate investments in tax havens: evidence from India," Asian Business & Management, Palgrave Macmillan, vol. 18(5), pages 360-388, November.
    7. Abdullah Almutairi & Baban Eulaiwi & Robert Evans & Grantley Taylor, 2023. "Tax Haven Use and Related‐Party Transactions: Evidence from Australia," Australian Accounting Review, CPA Australia, vol. 33(4), pages 352-374, December.

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