Tax Avoidance Determinants: Evidence From Spanish Business Groups

Abstract

This paper examines the effect of business group affiliation and complexity on the tax avoidance activities of Spanish firms. Using firm-level data covering the period 2007-2016, we design an algorithm to identify business groups with shareholder and subsidiary data from the Sistema de Analisis de Balances Ibericos (SABI) database. Our main results show that companies belonging to a business group tend to avoid more taxes. They also indicate that business groups with complex structures exhibit lower effective tax rates (ETRs). Finally, we find strong evidence that regions with tax autonomy show lower corporate tax rates. We use static and dynamic panel data model specifications to address the relationship between business groups, their complexity and their tax avoidance, controlling for firm-specific and regional determinants of tax avoidance.