Tax Regimes, Regulatory Change and Corporate Income Tax Aggressiveness in China

44 Pages Posted: 28 Aug 2012 Last revised: 23 Jan 2013

See all articles by Guodong Yuan

Guodong Yuan

University of South Australia - School of Commerce

Ron P. McIver

Centre for Applied Financial Studies (CAFS), University of South Australia - School of Commerce

Michael Burrow

University of South Australia - Division of Business and Enterprise - (CAFS), University of South Australia - School of Commerce

Date Written: August 27, 2012

Abstract

This study uses the ‘natural experiment’ provided by China’s implementation of its 2007 Accounting Standards for Business Enterprises No.18 — Corporate Income Tax Accounting and 2008 Enterprise Income Tax Law to address two questions. Have China’s tax regulatory environment changes had an impact on the corporate tax avoidance of its listed companies? Does ownership structure — i.e., state-controlled, private or foreign-invested — impact on companies’ responses to regulatory change? Drawing on effective tax planning, agency, tax avoidance and legitimacy theories, this study uses a balanced panel-data sample for the 2007 to 2010 period on 1,224 companies listed on the Shanghai and Shenzhen Stock Exchanges. We find that tax avoidance by listed companies, measured by the book-tax gap, has reduced as a result of regulatory reform. Additionally we tentatively support the influence of ownership/control on corporate tax avoidance in China, with state-controlled companies evidencing lower levels of the book tax gap.

Keywords: China, corporate income tax aggressiveness, regulatory environment change, ownership impact, transition economy

JEL Classification: G38, H26, P37

Suggested Citation

Yuan, Guodong and McIver, Ronald P. and Burrow, Michael, Tax Regimes, Regulatory Change and Corporate Income Tax Aggressiveness in China (August 27, 2012). 25th Australasian Finance and Banking Conference 2012. Available at SSRN: https://ssrn.com/abstract=2136777 or http://dx.doi.org/10.2139/ssrn.2136777

Guodong Yuan (Contact Author)

University of South Australia - School of Commerce ( email )

37-44 North Terrace
Adelaide SA 5000, South Australia 5001
Australia

Ronald P. McIver

Centre for Applied Financial Studies (CAFS), University of South Australia - School of Commerce ( email )

37-44 North Terrace
GPO Box 2471
Adelaide SA 5000
Australia

Michael Burrow

University of South Australia - Division of Business and Enterprise - (CAFS), University of South Australia - School of Commerce ( email )

37-44 North Terrace
Adelaide SA 5000, South Australia 5001
Australia

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