Will Natural Disasters Affect Tax Avoidance

China has vast area,large population density and high population shift speed,which makes it become one of the countries most affected by disasters in the world.In the past two decades,China’s urbanization process has accelerated,and the population density of big cities has further increased.Problems such as the decline of cultivated land area,environmental pollution and soil erosion caused by the pursuit of high-speed economic development have further expanded the geographical and population scope of disaster impact.Natural disasters have become more and more unstable factors which affect the coordinated and sustainable development of China’s economy and society.Under this situation,disaster economics,as a science to study the economic effects of natural disasters,has been paid more and more attention.The research on the economic effects of natural disasters has gradually infiltrated from the macro level to the micro level.From the perspective of enterprise management,the occurrence of disasters will directly affect the production activities of enterprises.The damage of the plant and equipment,the casualties of the company’s employees,the obstruction of the sources of production materials and the sales channels of commodities all have negative impacts on the company’s performance in that year.As the objective economic losses caused by natural disasters are not easy to quantify,enterprises have sufficient space to use this external impact to complete the earning management activities,so as to achieve the purpose of tax avoidance.Based on this,this paper takes the enterprise tax avoidance as the starting point,and researches the microeconomic effect of natural disasters.Based on the disaster data from 2009 to 2014 and the financial data of A-share listed companies in Shanghai and Shenzhen,this paper empirically studies the relationship between natural disasters and corporate tax avoidance by constructing disaster economic loss index and corporate tax avoidance index.The results show that natural disasters can promote tax avoidance activities.The greater the degree of economic loss caused by natural disasters,the higher the degree of tax avoidance.Further,this paper analyzes the heterogeneity of the research conclusions based on the relevant literature.The results show that: first,the political background of stateowned enterprises can act as a protective umbrella in tax avoidance activities.Local protectionism and aid to state-owned enterprises make the promotion effect of natural disasters on tax avoidance more significant.Second,in areas with strong tax management,conventional tax avoidance tools are easy to fail.As a tax avoidance tool,natural disaster can play an alternative role.After reporting the disaster,the illegal cost and reputation cost of tax avoidance activities largely decreased.Therefore,in the regions with higher taxation efforts,the impact of natural disasters on enterprises’ tax avoidance is more significant.Thirdly,the principal-agent problem is helpful to improve the effect of disaster on tax avoidance.The financial information of enterprises with outstanding principal-agent problems is highly complicated,which makes the tax departments feel difficult to understand.Enterprises with outstanding principal-agent problems provide sufficient space for the planning of tax avoidance activities,and is more conducive to the positive impact of natural disasters on tax avoidance activities.Fourth,innovative enterprises enjoy a lot of tax preferences and financial subsidies from the government,the actual tax burden is small,and the promotion effect of natural disasters on their tax avoidance activities is not significant.In contrast,the tax burden of non-innovative enterprises is higher.In order to reduce the tax burden,they will participate in the aggressive tax avoidance activities.In order to make the research content more abundant and complete,this paper makes mechanism analysis and further research in the next part.First of all,this paper analyzes the mechanism of natural disasters to improve the degree of tax avoidance from the perspectives of earnings management and capital constraints.On the one hand,natural disasters provide enterprises with opportunities for earnings management.By reporting the disaster in the financial notes,the enterprise can make more reasonable over provision of asset impairment loss in the year of natural disaster in the region,which can help it complete the virtual increase of operating expenses and achieve the purpose of tax avoidance.On the other hand,,the enterprise’s operating activities in the current year are impacted by disasters,which makes the financial constraints increase.In order to slow down the cash outflow,the enterprise tends to take greater tax avoidance.After clarifying the impact and internal logic of natural disasters on enterprises’ tax avoidance behavior,this paper makes an deep study from the perspective of the game between the government and enterprises in tax management work,that is,whether natural disasters will affect the government’s tax collection behavior.The results show that natural disasters promote the government to increase the "over tax" collection in the next year,in order to alleviate the financial pressure.Finally,this paper uses the method of replacing index and deleting outliers to test the robustness of the research conclusion.Based on the relevant conclusions of this paper,the research from the perspective of enterprises and governments shows that natural disasters will aggravate the game between government and enterprises in tax collection and management.After the disaster,the chain that enterprise evaded the tax,and then the government overtaxed to reveals the lack of efficiency of tax management in China,which provides strong evidence for improving the efficiency of the tax departments work.