Government-Company Interaction And Corporate Tax Avoidance

In recent years,with the economic growth in our country entering a new normal,some industries have experienced a downward trend.The discussion on whether corporate tax burden affects their sustainable development is becoming increasingly fierce.Under the background of China's unique system,the interaction between government and companies is a key factor affecting the development of enterprises.As the core element of the profit distribution between enterprises and governments,tax revenue has always been the focus of attention of policy makers,enterprises and academic circles.There is no lack of discussion in the existing literature,focusing on the relationship between government and enterprises on the influencing factors of tax avoidance.However,there are few studies concerning about the interaction between the two based on the government's fiscal needs.Under the tax-sharing system,fiscal revenue is an important foundation for local economic growth.The fiscal needs of local governments will inevitably have an impact on the tax avoidance behavior of local enterprises,resulting in a two-way interaction between the government and enterprises around tax distribution.During the interaction,the efficiency of communication between government and enterprises has played a significant role.Based on this,this paper examines the impact of the two types of demands of fiscal pressure and fiscal growth on tax avoidance behavior of companies and their interaction between government and companies in the short-term and long-term,taking the example of the non-financial listed companies listed in A-share market of China during 2008-2015.At the same time,we study the role of information communication efficiency between government and enterprises in tax avoidancefrom the perspective of geographic dispersion.The empirical results show that:first,the short-term financial pressure caused by natural disasters on local governments has significantly affected the tax avoidance of local companies.The greater the typhoon damage suffered by coastal cities,the lower the tax avoidance rates of local enterprises,and the relationship is more announced for the state-owned enterprises,companies with political connections and local leading enterprises.Further study found that local fiscal pressure,institutional economic environment,capital market pressure and business environment will have an impact on the above relationship;meanwhile,through the alternative interpretation test,it is found that the reduction of tax avoidance by enterprises mainly comes from the voluntary apportionment instead of the government.In addition,enterprises with less tax avoidance after the disaster can obtain more government grants and credit resources in the future and realize the mutual trust and mutually beneficial relations between the government and enterprises.Second,starting from the mystery of China's tax revenue growth,this paper construct a tax stickiness model to study the impact of financial growth demand on corporate tax avoidance,which found the enterprise income tax expenses of pre-tax profits decreasing speed,significantly lower than pre-tax profits income tax expenses rise speed,indicating that tax-stickness phenomenon existing in Chinese listed company income tax.This phenomenon is more announced for state-owned enterprises,while it's weaker for enterprises with political connections in state-owned enterprises.Further,the fiscal decentralization,the degree of marketization and the promotion of local officials will affect the above relations.At the same time,accrued earnings management can affect tax adhesion,while real earnings management does not have an impact,which explains the mechanism of tax adhesion phenomenon.In addition,enterprises with grater tax stickness can gain more government subsidiesin the future,shows that enterprises can help the government to promote the growth of fiscal revenue while being able to get the government's resources,and also shows the mutual benefit relationship between government and enterprises.Thirdly,geographic dispersion has reduced the efficiency of communication between government and enterprises.The higher the dispersion degree of enterprises,the lower the level of tax avoidance.This indicates that geographical dispersion improves the enterprises'access to tax regulatory information and the cost of communication with the government,thus reducing the ability of enterprises to deal with tax regulation,and this relationship is more significant in non-state-owned enterprises.Further,the internal connected transactions,the external political environment and the pressure from the capital market will affect the above relationship;at the same time,effective internal control and convenient external traffic can ease the impact of geographical dispersion on tax avoidance.In addition,the increase of geographical dispersion when the number of subsidiaries is small can provide enterprises with more tax avoidance space.To sum up,the evidence shows that government fiscal demand is a key factor that affects tax avoidance,and the relationship of the two is not a one-way profit transferring process from enterprises to governments,but a two-way interactive process in which enterprises actively cooperate and governments make corresponding compensations.In this process,the communication between governments and enterprises affects the mutual efficiency.The innovation and contribution of this paper lies in:First,from the perspective of enterprise income tax,it responds to the current society's debate about the high tax burden on Chinese enterprises.The conclusion of this paper shows that the increase of enterprise income tax is not caused by the government pressure completely,but the local enterprises take the initiative to reduce the tax avoidance for the purpose of building the relationship between government and companies in response to their own situation.What's more,the tax revenue is not raised by the unilateral pay,but a two-way mutually beneficial process.Second,based on the government's fiscal needs,this paper constructs the research framework of corporate tax avoidance from macro to micro.The existing literature on the relationship between government and companies and corporate tax avoidance rarely discusses the deep-seated reasons for the interaction between government and companies in tax avoidance from the perspective of the government's fiscal needs.Based on the above documents,this paper sorts out the macro-level tax-sharing system and the background of officials'promotion and examination system and puts forward two major financial demands of local governments:financial pressure and financial growth,analyzing the impact of the two types of demand on tax avoidance from short-term static and long-term dynamic,which broadens the research horizons.Finally,this paper enriches the literature on the factors that affect tax avoidance in enterprises from the perspective of natural disasters,tax stickiness and geographic dispersion,and provides new research methods and ideas.In the empirical study of this paper,we introduce a macro-level natural disaster and measure it with objective typhoon destructive power.At the same time,we introduce the concept and test method of tax stickiness with reference to the cost-stick model,and provide a new geographical dispersion measurement,allowing a new perspective and method for the research in related fields in the future.In addition,the conclusions of this paper have certain practical significance for changing the existing tax collection and management system,strengthening the construction of tax fairness,and building a good ecology of government and companies in our country.The interaction between government and companies in the process of enterprises' tax avoidance,to a certain extent,affected the market fair mechanism and distorted the allocation of resources in the market.This will provide a theoretical basis for the future supervision over the tax collection and administration in the reform of our tax system.