National Culture and Tax Avoidance of Multinational Corporations

Ji Seon Yoo and Ye Ji Lee
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Ji Seon Yoo: Division of Business Administration, Hoseo University, Chungcheongnam-do 31066, Korea
Ye Ji Lee: Graduate School of Science in Taxation, University of Seoul, Seoul 02504, Korea

Sustainability, 2019, vol. 11, issue 24, 1-28

Abstract: This study tests the role of national culture in tax avoidance by multinational corporations (MNCs). Hofstede’s four cultural dimensions are used to measure cultural differences across countries: uncertainty avoidance, individualism, masculinity, and power distance. The empirical results of the study imply that MNCs headquartered in countries with low uncertainty avoidance, low individualism, high masculinity, and low power distance engage in a higher level of tax avoidance than MNCs in countries with high uncertainty avoidance, high individualism, low masculinity, and high power distance. In addition, the cultural features of the parent company generally have a stronger influence on group-level tax avoidance than those of its subsidiaries. This study contributes to the literature by presenting empirical evidence of culture as a determinant of tax avoidance by MNCs.

Keywords: effective tax rate; Hofstede’s cultural dimensions; multinational corporations; nontax factor; tax avoidance (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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