Tax Competition, Tax Enforcement and Tax Avoidance
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| Title | Tax Competition, Tax Enforcement and Tax Avoidance
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| Author | Fan Ziying and Tian Binbin |
| Organization | Huazhong University of Science and Techonology |
| Email | ivannj@163.com；tianbinux@163.com |
| Key Words | Tax Avoidance; Tax Enforcement; Income Tax Sharing Reform |
| Abstract | This paper uses the Income Tax Sharing Reform in 2002 to identify the tax enforcement and estimates its effect on the avoidance of corporate income tax. The reform attributes the firms to two tax agencies, National Tax Bureau and Local Tax Bureau, according their established date. Tax competition will decrease the tax enforcement of Local Tax Bureau, while does not affect the National Tax Bureau, so the difference of tax enforcement perfectly measures tax competition. Based on 170 000 firms’ data, we find the decreased tax enforcement of Local Tax Bureau induces tax avoidance of firms, which is only robust in firms with enough mobility, such as private firms. We also find the tax enforcement of Local Tax Bureau is caused by the tax effort not the tax capability. These results also explain the helping hand of China local governments and the abnormal increasing of tax revenue. |
| Serial Number | WP395 |
| Time | 2012-12-07 |
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