Corporate Political Contributions and Tax Avoidance
48 Pages Posted: 3 Mar 2014 Last revised: 20 Jan 2018
Date Written: January 9, 2018
In this study we examine the channels through which corporate political contributions affect firm-level tax outcomes. Firms that make political contributions are more likely than other firms to be singled out in rifle-shot tax legislation and receive firm-specific tax relief. Firms also receive tax benefits when members of their industry cohort make political contributions, regardless of the firm’s own political contributions, consistent with politicians taking actions that benefit an entire class of assets or type of investment. Finally, we find some evidence that political connections affect tax enforcement, resulting in lower tax burdens for politically active firms.
Keywords: Political contribution; Rifle-shot provision; Tax avoidance; Tax enforcement
JEL Classification: M41, H25, D72, G28
Suggested Citation: Suggested Citation