Inquiry Letters and Tax Aggressiveness

Yewei Wu and Bofu Zhang

China & World Economy, 2023, vol. 31, issue 4, 37-65

Abstract: This study examined the impact of inquiry letters on corporate tax aggressiveness based on the special inquiry system in Chinese stock exchanges. It found that the receipt of inquiry letters significantly inhibited tax aggressiveness. The channel through which inquiry letters worked involved a monitoring effect on related‐party transactions. The disincentive effect of inquiry letters on corporate tax aggressiveness was mainly found in firms with overseas operations, low‐quality of internal control, and weak tax enforcement. Examining the textual information in inquiry letters, the results show that more questions and the demand for a specific opinion from the auditor led to a greater disincentive effect. The level of detail in firms' reply letters weakened this disincentive effect. Finally, the disincentive effect of tax aggressiveness was more pronounced when inquiry letters pointed to tax‐related issues.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/cwe.12491

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:chinae:v:31:y:2023:i:4:p:37-65

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1671-2234

Access Statistics for this article

China & World Economy is currently edited by Yongding Yu

More articles in China & World Economy from Institute of World Economics and Politics, Chinese Academy of Social Sciences Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().