TITLE:
Industrial Policy and Tax Avoidance
AUTHORS:
Ruitao Xie
KEYWORDS:
Industrial Policies, Tax Avoidance, Financial Constraints, Five-Year Plan, Ownership Type, Tax Enforcement
JOURNAL NAME:
American Journal of Industrial and Business Management,
Vol.8 No.6,
June
14,
2018
ABSTRACT: Since the past three decades, China’s economy has
been growing rapidly. The impact of the rapid development of China’s economy is
inseparable from the government, who intervenes in the economic life through
laws, policies, regulations, etc. As a way of intervention by the government, the
promulgation and implementation of policies have certain purposes. In the
capital market, the government changes the financing constraints of companies
through the implementation of industrial policies, thus changing their tax
avoidance behaviors. This paper selects the listed companies in Shanghai and
Shenzhen during the Tenth Five-Year Plan and the Twelfth Five-Year Plan of
National Economy and Social Development as the sample to analyze the influence
of Chinese industrial policy on the tax avoidance behavior of enterprises and
their internal mechanism. Our study finds that firms that are supported by
industrial policies have been able to ease their financial constraints and have
a lower degree of tax avoidance than those that are not supported by industrial
policies. Further analysis finds that the above phenomenon is more pronounced
in the non-state-owned enterprises and the regions with weaker tax enforcement.
Our study not only enriches the academic literature on the microscopic mechanism
of industrial policy, but also provides new empirical evidence on the factors
of corporate tax avoidance.