Abstract
Based on the data of National Taxation Survey from 2009 to 2015, a fixed-effect model is adopted in this paper to analyze the effect and mechanism of the local government debt on tax avoidance. The result shows the scale of local government debt is significant positively correlated with the aggressive of corporate tax avoidance. With further examination, the paper finds that local government debt has a significant "crowding-out effect" on corporate financing, which exacerbates corporate financing constraints, and thus intensifies the aggressive of corporate tax avoidance. In the heterogeneity analysis, the results show that the impact of local government debt on corporate tax avoidance has significant heterogeneity among enterprises with different property rights and different scales. This research not only expands and deepens the theoretical understanding of local government debt and corporate tax avoidance but also provides references for strengthening corporate tax compliance.
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