Abstract
Since the past three decades, China’s economy has been growing rapidly. The impact of the rapid development of China’s economy is inseparable from the government, who intervenes in the economic life through laws, policies, regulations, etc. As a way of intervention by the government, the promulgation and implementation of policies have certain purposes. In the capital market, the government changes the financing constraints of companies through the implementation of industrial policies, thus changing their tax avoidance behaviors. This paper selects the listed companies in Shanghai and Shenzhen during the Tenth Five-Year Plan and the Twelfth Five-Year Plan of National Economy and Social Development as the sample to analyze the influence of Chinese industrial policy on the tax avoidance behavior of enterprises and their internal mechanism. Our study finds that firms that are supported by industrial policies have been able to ease their financial constraints and have a lower degree of tax avoidance than those that are not supported by industrial policies. Further analysis finds that the above phenomenon is more pronounced in the non-state-owned enterprises and the regions with weaker tax enforcement. Our study not only enriches the academic literature on the microscopic mechanism of industrial policy, but also provides new empirical evidence on the factors of corporate tax avoidance.
Highlights
Our study finds that firms that are supported by industrial policies have been able to ease their financial constraints and have a lower degree of tax avoidance than those that are not supported by industrial policies
In order to achieve the development goals in the “Five-Year Plan”, the government will generally relax the qualifications for bank credit approval, stock market listing, and refinancing in support of industry companies, and direct a large amount of resources to the supported industries, alleviating the company’s financing constraints
This article discusses the relationship between industrial policy and corporate tax avoidance behavior from the perspective of financing constraints, the nature of property rights, and the strength of tax collection and management
Summary
Since China’s reform and opening up in the 1980s, China’s economic system has gradually transformed from a planned economy to a market economy. To intervene in industrial organizations within the scope of the law, but the starting point of the intervention is to improve or maintain the international competitiveness of US industries On this basis, the government maintains the tradition of “maintaining free competition” and the Clinton Administration’s flexible industrial organization policy. The government maintains the tradition of “maintaining free competition” and the Clinton Administration’s flexible industrial organization policy It safeguards the competitiveness of industries that have a monopoly in the world, and promotes innovation in these industries. The Cold War junta industry consumed a large amount of U.S resources, seriously affected the development of civilian industries, and even jeopardized the international competitiveness of the industry It enabled the U.S to possess the most advanced military technologies in the world today. The industry’s capital costs and financing constraints have been changed, and affect the company’s individual tax avoidance
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