Anti-corruption campaign and corporate tax evasion: evidence from China

Dongmin Kong, Yue Zhang () and Ni Qin ()
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Dongmin Kong: Zhongnan Huazhong University of Economics and Law
Yue Zhang: Huazhong University of Science and Technology
Ni Qin: Huazhong University of Science and Technology

International Tax and Public Finance, 2025, vol. 32, issue 1, No 1, 50 pages

Abstract: Abstract While the literature has well-documented economic consequences of corruption on economic development, whether and how corruption affects corporate tax evasion is unclear. This study uses anti-corruption investigations in China as an exogenous shock to local corruption to identify the link between corruption and firms’ tax evasion behavior in a difference-in-differences framework. We present strong evidence that the anti-corruption campaign has a negative effect on corporate tax evasion. One plausible explanation is that the anti-corruption campaign conducted by the central inspection team undermined the political umbrella of companies and increased the chances of local government-enterprise collusion being detected, thereby inhibiting tax avoidance. This effect is more significant among firms in provinces with high inspection intensity, firms in economically-developed regions, large firms and firms in politically-sensitive industries. Our findings enrich the existing studies on the economic and fiscal effects of anti-corruption campaigns.

Keywords: Anti-corruption; Tax evasion; Difference-in-differences; China (search for similar items in EconPapers)
JEL-codes: D73 G30 H26 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10797-023-09777-x

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