Do more financing obstacles trigger tax avoidance behavior? Evidence from Indian SMEs

Mohamed Elbannan and Omar Farooq
Additional contact information
Omar Farooq: ADA University

Journal of Economics and Finance, 2020, vol. 44, issue 1, No 8, 178 pages

Abstract: Abstract Using the data from Enterprise Survey, this paper documents the following findings in India. Firstly, we show that firms experiencing higher obstacles in accessing finance are more likely to avoid taxes. We argue that firms try to overcome the cash shortage that results from higher obstacles in accessing finance by reducing taxes paid to the government. Our results are robust across various sub-samples and after controlling for endogeneity problem. Secondly, we show that, for any two firms with similar levels of obstacles in accessing finance, the firm that avoids taxes is more likely to invest than the firm that does not avoid taxes. Lastly, firms headquartered in states/provinces with better institutional infrastructure have weaker relationship between access to finance and tax avoidance.

Keywords: Tax avoidance; Access to finance; SMEs; World bank enterprise survey; Emerging markets (search for similar items in EconPapers)
JEL-codes: G30 H26 O16 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://link.springer.com/10.1007/s12197-019-09481-9 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:jecfin:v:44:y:2020:i:1:d:10.1007_s12197-019-09481-9

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/12197/PS2

DOI: 10.1007/s12197-019-09481-9

Access Statistics for this article

Journal of Economics and Finance is currently edited by James Payne

More articles in Journal of Economics and Finance from Springer, Academy of Economics and Finance Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().