| Abstract | Taxes represent a significant cost to the firm and shareholders, and it is generally expected that shareholders and managers have incentives to engage in tax avoidance. However, this argument was based on foreign private firms and ignored the impact of state ownership. In China, economy of a variety of system of ownership provides best opportunity to investigate how a firm’s tax avoidance affected by state ownership. Using Chinese listed companies during 2008-2012, and multiple measures to capture tax avoidance, I find that the degree of tax avoidance in state-owned firms is lower than non-state-owned firms. Furthermore, I proposed three possible explanations for this difference: tax structure, tax avoidance-compensation sensitivity and tax avoidance-value sensitivity. Findings of this paper are helpful for investors to understanding the difference in tax avoidance between sate-owned and non-state-owned firms, and for regulators to promote tax supervision and tax fairness. |