The Influence of Tax Authority on Corporate Tax Avoidance: Mechanism and Motivation

Abstract

In the past, literature about the government's influence on corporate tax burden have studied corporate tax avoidance from the perspective of tax collection and management, while few have examined corporate tax avoidance from the perspective of policy formulation and policymakers. This paper fills this gap. Government is an empty concept, and its policy characteristics are actually the reflection of real core government officials' decision-making. By referring to Bertrand and Schoar (2003), Dyreng, Hanlon, and Maydew (2008), this paper finds that individual factors of financial leadership have a significant impact on the level of income tax rates of companies in their jurisdictions. Furthermore, the formulation of the financial budget is the influence path, including the proportion of local general budget revenue in local GDP, the proportion of local general budget expenditure in local GDP, the proportion of local tax revenue in local GDP, and the proportion of local enterprise income tax in all tax revenue. Finally, this paper finds that the leaders' motivation for their future careers is the influence of corporate tax avoidance. The characteristics that impact corporate income tax are the tenure of the director of finance, age, and whether the next post is promoted to the vice governor or vice mayor.