Financial Situation And Tax Avoidance

Tax avoidance has always been a hot topic in academic circles.In the studies related to tax avoidance,there is a large number of documents on the influencing factors of tax avoidance.Scholars have explored the influence of various factors on the degree of corporate tax avoidance.These factors are mostly indirect factors such as corporate governance and the characteristics of managers.Few scholars have studied the influence of financial situation on tax avoidance.This paper directly investigates the impact of the financial situation of the enterprise on its tax avoidance behavior.Firstly,this paper analyzes the mechanism of the influence of financial situation on tax avoidance from the perspective of the benefits and costs of tax avoidance.The direct benefits from tax avoidance are to increase cash flow and improve operational stability.And the negative effects of tax avoidance are potential tax penalty costs and reputational loss.In theory,when the marginal revenue of tax avoidance is equal to the marginal cost,the amount of tax avoidance is the best.As the financial situation of the company deteriorates,the marginal revenue from tax avoidance increases,and the marginal cost decreases.We expect that the company will increase the tax avoidance accordingly.Then,we classify the companies according to the nature of property rights,the level of institutional ownership,the degree of financial marketization of the region where the company is located,and analyzes the heterogeneity.In addition,we also analyze the companies in financial distress separately.Using the data of A-share listed companies from 2008 to 2016 as sample,this paper finds that the worse the financial situation of an enterprise,the higher the degree of tax avoidance.Furthermore,the results of heterogeneity testes show that:(1)Compared with the non-state-owned enterprises,the tax avoidance degree of the state-owned enterprises increases with the deterioration of the financial situation by a smaller extent;(2)Compared with the enterprises with low level of institutional ownership,the tax avoidance degree of the enterprises with a high level of institutional ownership increases with the deterioration of the financial situation by a bigger extent;(3)Compared with the enterprises in the area with low degree of financial marketization,the tax avoidance degree of the enterprises in the area with high degree of financial marketization increases with the deterioration of the financial situation by a smaller extent;(4)Compared with the whole sample,the tax avoidance degree of the financial distress group is less affected by the change of the financial situation.Finally,according to the conclusion of the study,we put forward some policy suggestions,such as carrying out tax inspection with the aid of financial indicators,taking non-state-owned enterprises as the key tax inspection objects,further improving the level of corporate governance and further promoting the reform of financial marketization.