Will fiscal transparency inhibit corporate tax avoidance? Evidence from China

Chang Cai and Xiaomin Cao ()
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Chang Cai: Central University of Finance and Economics
Xiaomin Cao: Central University of Finance and Economics

International Tax and Public Finance, 2024, vol. 31, issue 5, No 5, 1274-1294

Abstract: Abstract This paper examines the influence of fiscal transparency on corporate tax avoidance, using a sample of Chinese enterprises. The findings indicate that enhancing regional fiscal transparency can significantly inhibit corporate tax avoidance. This is achieved by enhancing tax collection and administration. Additionally, the inhibitory effect can be strengthened by corporate rent-seeking behavior and the level of local debt. Further analysis reveals that the impact of fiscal transparency on tax avoidance is more significant for non-state-owned enterprises and large enterprises in China. Moreover, in regions characterized by high degrees of financial development and financial pressure, the enhancement of fiscal transparency has a more significant impact on reducing corporate tax avoidance compared to regions with lower degrees of financial development and financial pressure. The conclusions drawn from this study provide empirical evidence and policy implications for improving the government-enterprise relationship in China and deepening the understanding of the dynamics between government and the market.

Keywords: Fiscal transparency; Corporate tax avoidance; Enterprise rent-seeking; Scale of local debt; Tax collection and administration (search for similar items in EconPapers)
JEL-codes: H26 L51 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10797-023-09804-x

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