Financial Constraints and Firm Tax Evasion
James Alm (),
Yongzheng Liu () and
Kewei Zhang ()
Additional contact information
Yongzheng Liu: Renmin University of China
Kewei Zhang: Renmin University of China
No 1901, Working Papers from Tulane University, Department of Economics
Most analyses of tax evasion examine individual behavior, not firm behavior, given obvious and recognized data issues. We use data from the Business Environment and Enterprise Performance Survey to examine tax evasion at the firm level, focusing on a novel determinant of firm tax evasion: the financial constraints (or credit constraints) faced by the firm. Our empirical results indicate across a range of alternative specifications that more financially constrained firms are more likely to be involved in tax evasion activities, largely because evasion helps them deal with financing issues created by financial and credit constraints. We further show that the effects of financial constraints are heterogeneous across firm ownership, firm age, and firm size. Lastly, we present some suggestive evidence on the possible channels through which the impact of financial constraints on firm tax evasion may operate, including a reduction of information disclosure through the banking system, an increase in the use of cash for transactions, and an increase in bribe activities in exchange for tax evasion opportunities.
Keywords: Tax evasion; financial constraints; firm-level data. (search for similar items in EconPapers)
JEL-codes: E26 G2 H26 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-eur, nep-iue, nep-pbe, nep-pub and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://repec.tulane.edu/RePEc/pdf/tul1901.pdf First Version, April 2019 (application/pdf)
Journal Article: Financial constraints and firm tax evasion (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:tul:wpaper:1901
Access Statistics for this paper
More papers in Working Papers from Tulane University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Yang Wang ().