Digital transformation and tax compliance in Chinese industrial sector

Shi Chen, Zhongyi Liu and Wanlin Cai

International Review of Financial Analysis, 2025, vol. 102, issue C

Abstract: This study examines the complex relationship between digital technology adoption and corporate tax compliance from a signaling theory perspective, focusing on the Chinese industrial sector. Using the propensity score matching difference-in-differences method, this study identifies a negative correlation between digital technology adoption and adherence to tax regulations. Although digital tools improve transparency and data accuracy, they also introduce complexities that create greater opportunities for tax evasion. Findings emphasize the need for a favorable signaling environment, characterized by strong regulatory frameworks and clear communication channels, to mitigate these risks and promote compliance. This study argues that the tax system must evolve alongside the digital economy and fully leverage digital tools to enhance tax administration. By examining how technological advancements interact with regulatory practices to shape corporate behavior. Insights presented offer valuable guidance for policymakers seeking to strengthen regulatory frameworks and effectively integrate digital advancements to improve tax compliance. Ultimately, this study provides actionable recommendations for enhancing compliance through the strategic application of digital technology within institutional structures.

Keywords: Digital technology; Corporate tax compliance; Signaling theory; Tax governance; Regulatory framework (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:102:y:2025:i:c:s1057521925002030

DOI: 10.1016/j.irfa.2025.104116

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