Board Level Employee Representation and Tax Avoidance in Europe

Vitols Sigurt ()
Additional contact information
Vitols Sigurt: Wissenschaftszentrum Berlin für Sozialforschung, Berlin, Germany

Accounting, Economics, and Law: A Convivium, 2023, vol. 13, issue 4, 457-478

Abstract: In part due to recent disclosures of large-scale tax evasion (e.g. Panama Papers), corporate tax avoidance has become a prominent public policy issue around the world. An increasing amount of research on this topic has focused on identifying the determinants of tax avoidance at the company and country level. Many newer studies examine differences in corporate governance as one of these determinants. However, this literature almost entirely neglects the role of board level employee representation (BLER), despite the fact that this form of ‘stakeholder governance’ is widespread in Europe. This paper addresses this gap in the literature by examining the relationship between BLER and tax avoidance at the company level. Two mechanisms are identified through which BLER might influence corporate tax behavior: 1) reduction in agency costs through monitoring and 2) the voting power of workers as board members to enter into coalitions with management and/or shareholders. Based on a sample of 2343 European listed companies between 2012 and 2017, this paper shows that companies with BLER have a higher effective tax rate (ETR) than companies without workers on the board. The analysis suggests that the ability to form coalitions through voting power is a more significant channel for influencing tax behavior than the monitoring mechanism. The policy implications are that governments should consider ‘stakeholder governance’ such as BLER as one measure supporting their efforts to combat tax avoidance.

Keywords: tax avoidance; worker participation; co-determination; stakeholder governance (search for similar items in EconPapers)
JEL-codes: H26 J51 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/ael-2019-0056 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

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:bpj:aelcon:v:13:y:2023:i:4:p:457-478:n:2

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/ael/html

DOI: 10.1515/ael-2019-0056

Access Statistics for this article

Accounting, Economics, and Law: A Convivium is currently edited by Reuven S. Avi-Yonah, Yuri Biondi and Shyam Sunder

More articles in Accounting, Economics, and Law: A Convivium from De Gruyter
Bibliographic data for series maintained by Peter Golla ().