Private Enterprise Tax Avoidance And Charitable Donations

Tax avoidance of enterprises is a common phenomenon in the world.It transfers national finance to businesses,once it is monitored,it could be punished by government agencies.The agency problems caused by tax avoidance of enterprises will also increase the misunderstanding of corporate stakeholders.It will lead to damage corporate renown,which results in the loss of corporate value.This paper starts with the theories of renown "insurance" and "benefits exchange",and discusses in depth the supplementary exchange mechanism for the consequences of corporate charity donations on tax avoidance.This paper selects samples of private listed companies from 2009 to 2016 to conduct empirical analysis.The results show that: The level of corporate tax avoidance is significantly positively related to corporate charitable donations.The higher the level of corporate tax avoidance,the more charitable donations will be promoted,thus after the company implements tax avoidance,they will actively take charitable donations to meet the needs of the government and provide reputation insurance.In addition,this paper classifies the sample according to the level of marketization,the intensity of tax collection and management,and whether or not it has political association,and further studies the relationship between tax avoidance by private enterprises and charitable donations.The results show that in areas where tax collection and management are weak,corporate tax avoidance has a significant positive correlation with corporate charitable donations.The relationship shows that the external collection and management environment can reduce corporate tax avoidance;compared with politically connected enterprises,non-politically connected enterprises will engage in charity activities after the enterprises avoid tax.The results of this paper provide evidence of the causal relationship between corporate tax avoidance and corporate charitable donations,thus expanding the “instrumental” literature of corporate charitable donations.