Study On The Effect Of Salary Incentive On Tax Avoidance

At present,most of our country’s enterprises enjoy a extensive tax preferential policies,as an important financial activity throughout the course of business operation,the application of tax planning has constantly entered people’s perspective and more frequently than before.However,tax planning is not all-win for enterprises,which may reduce the tax burden for enterprises,but also provides strong support for managers’ rent-seeking behavior.If the shareholders want to mitigate the managers’ behavior of seeking profits through tax avoidance,they should take appropriate incentive measures to reduce the managers’ rent-seeking.As common incentive means used by shareholders in modern companies,what kind of impact do equity incentive and monetary compensation incentive have on the tax avoidance behavior of executives? Is there a difference in the dynamics of tax avoidance among executives? Because of the non-market nature of state-owned enterprises and the particularity of the identity of top management personnel,there will be a big difference between them and private enterprises,therefore,whether different salary incentives have the same effect on tax avoidance under different ownership structures?Based on the consideration of these problems,this paper considers the possible effects of two types of executive compensation incentives(monetary compensation incentive and equity incentive)on corporate tax avoidance.This paper discusses the conception of monetary compensation incentive,equity incentive,corporate tax avoidance and so on,according to the principal-agent theory,the effective tax planning theory,Malsow’s hierarchy of needs and rent-seeking theory to make theoretical analysis,this paper summarizes the mechanism of tax avoidance and its possible influence on the enterprise,and the different salary incentive methods may bring different effects to the senior managers,the influence mechanism of the two kinds of salary incentives on the tax planning and the difference of the influence degree of the two kinds of incentives on the tax planning.Based on the panel data of China’s listed companies in2015-2018,this paper adopts the fixed-effect model to investigate the relationship betweenmanagerial equity incentives,monetary incentives and corporate tax avoidance.This paper discusses whether the two incentive policies have different effects on tax avoidance in state-owned enterprises and private enterprises.This paper finds that monetary compensation incentive has a positive effect on tax avoidance,because the management under the private enterprise is more willing to pursue the benefit,this kind of performance is more obvious in private enterprises;there is a negative correlation between equity incentive policy and tax avoidance degree,and the performance in private-owned enterprises is more obvious;when the enterprises adopt both stock incentive and monetary incentive,because the impact of the equity incentive policy on the management is long-term,but the effect of monetary incentive is short-term,the satisfaction that the management gets economic benefits from it is less than the equity incentive,so the inhibition of stock incentive to tax avoidance is greater than monetary incentive to tax avoidance.In order to improve the robustness,the samples are classified by industry and regressed in this paper.In the robustness test,the above conclusions are also valid.Based on the research results,this paper offers some advice from the perspectives of companies and tax authorities respectively,that enterprises can choose appropriate incentive mechanism and adjust the proportion of different incentive methods to adjust the tax planning behavior,the tax authorities can also canvass the suspicious enterprises according to the incentive measures they take and pay attention to the enterprises that may avoid tax irrationally,and finally clarify the limitations and prospects of this paper.