Product Market Power,Tax Enforcement And Tax Avoidance

Tax avoidance has always been a common problem in various countries.It mainly arises from competition between governments and companies for tax revenue.For the government,the government revenue mainly comes from taxes,and the stability of tax revenue is very important for the sustainable development of the national economy.Therefore,the taxation department needs to supervise the taxation of companies,collect as much revenue as possible,and reduce the loss of fiscal revenue.For companies,the realization of maximization of profits is the main goal.Therefore,companies have the incentive to reduce tax expenditures and increase corporate profits after taxes,resulting in tax avoidance.With the development of economy in our country,tax avoidance is becoming more and more obvious.Tax department and scholars are very concerned about this.Therefore,the study of tax avoidance has become a hot topic.The existing literature usually studies the factors that affect tax avoidance from the perspective of corporate governance.This paper starts with the individual competitiveness of companies,and studies the relationship between product market power and tax avoidance.Based on this,this paper also further studies whether tax enforcement could inhibit the relationship between market power and corporate tax avoidance.This paper analyzes the relationship between product market power,tax enforcement and tax avoidance from the theoretical and empirical aspects.From a theoretical perspective,this paper first uses the classical theory of effective tax planning and expected utility theory to clarify the mechanism of how product market power affects tax avoidance,and then analyzes the impact of tax enforcement as an external regulatory variable on the role of the two.And then this paper proposes two main research hypotheses in this article.From the perspective of empirical analysis,the main conclusions drawn in this paper are as follows:(1)There is a significant positive correlation between the product market power and tax avoidance,that is,companies with stronger product market power,are more likely to participate in tax avoidance.(2)Tax enforcement can restrain the positive correlation between product market power and corporate tax avoidance.That is,in the areas where tax enforcement is strong,the promotion effect of product market power on tax avoidance is smaller,which proves the effectiveness of external regulation.Finally,based on the research conclusions,this article proposes some policy recommendations as follows:For tax authorities,firstly,they should focus on the tax-related behavior of the 'leader' companies in the industry,also,they should realize the tax avoidance has the characteristics of the industry,and it requires specific analysis of specific issues.Finally,the tax authorities should improve their collection and management capabilities.For investors,they should update their own investment ideas.They should not blindly trust companies with strong product markets power.When making investment decisions,they need to include tax-related risks in the assessment system and make rational decisions.