Does Corporate Donation Lead to More Tax Aggressiveness? An Empirical Evidence of China’s Listed Firms
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| Title | Does Corporate Donation Lead to More Tax Aggressiveness? An Empirical Evidence of China’s Listed Firms
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| Author | Yuan Cheng，Hu Tao and Li Yue |
| Organization | Peking University |
| Email | yc@pku.edu.cn;hutao@pku.edu.cn;lyxzwj@pku.edu.cn |
| Key Words | Public Goods Provision; Corporate Donation; Tax Aggressiveness; Corporate Social Responsibility |
| Abstract | Governmental and private provisions of public goods are always considered to co-exist and crowd out each other. Almost all the previous studies on their relation focus on the crowding out effect of public provision, while the adverse effect has been largely neglected. This paper attempts to investigate the causal effect of corporate donation on its tax aggressiveness from a new perspective of the impact of private donation on public provision. By using the data of China’s listed firms from 2003 to 2014, we use IV method to address potential endogeneity of reverse causality and find that corporate donation does not lead to any more tax aggressiveness. We propose a supervision mechanism to explain the results. When firms donate more, they are subject to more public attention and higher risk of tax avoidance being checked by tax authorities, which reduces tax aggressiveness and offsets partly the substitution effect of donation. We empirically demonstrate the effect of supervision by including the local workforce of media business in the regression. |
| Serial Number | WP1328 |
| Time | 2019-01-25 |
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