Does Tax Avoidance Diminish Sustainability?

32 Pages Posted: 31 Oct 2017 Last revised: 6 Dec 2017

See all articles by Chika Saka

Chika Saka

Kwansei Gakuin University; Kwansei Gakuin University

Tomoki Oshika

Waseda University

Masayuki Jimichi

Kwansei Gakuin University - School of Business Administration

Date Written: September 6, 2017

Abstract

Purpose: Firm tax avoidance has gathered substantial public attention in both the real world and academic literature. Stakeholder theory suggests that firms need to maintain good relationships with all firm stakeholders to be sustainable.Although it makes the firm profitable in the short run, tax avoidance may diminish the sustainability of the firm. Therefore, the purpose of this study is to empirically examine the relationship between tax avoidance and sustainability.

Design/methodology/approach: This study uses 30 years of data from 58 countries, and provides empirical evidence on whether effective tax rates can distinguish sustainable firms from those that are not.

Findings: This study finds that tax avoidance diminishes sustainability; tax avoidance is found in most countries and there are significant variations of tax avoidance at the individual firm level.

Originality/Value: The study makes three key contributions to the literature. First, it extends the findings of existing research by calculating the differences between effective tax rates (ETRs) and statutory tax rates, which is more clearly representative of tax avoidance than the ETRs alone. Second, the empirical analyses involve firms in 58 countries over 20 years, making the results generalizable. Finally, it is the first to show the long-term economic consequences of tax avoidance.

Research Implications: The evidence sheds light on tax avoidance, which has grown to the point where it can no longer be ignored by researchers or citizens. This evidence might change firms’ tax avoidance behaviour.

Keywords: Tax Avoidance, Statutory Tax Rate, Sustainability

Suggested Citation

Saka, Chika and Saka, Chika and Oshika, Tomoki and Jimichi, Masayuki, Does Tax Avoidance Diminish Sustainability? (September 6, 2017). Available at SSRN: https://ssrn.com/abstract=3061565 or http://dx.doi.org/10.2139/ssrn.3061565

Chika Saka (Contact Author)

Kwansei Gakuin University ( email )

1-155, Uegahara, Ichiban-cho
Nishinomiya, Hyogo 662-8501
Japan

Kwansei Gakuin University ( email )

1-155, Uegahara, Ichiban-cho
Nishinomiya, Hyogo 662-8501
Japan

Tomoki Oshika

Waseda University ( email )

1-6-1
Nishi-Waseda
Shinjuku-ku, TOKYO 169-8050
Japan

Masayuki Jimichi

Kwansei Gakuin University - School of Business Administration ( email )

1-155 Uegahara-1bancho
Nishinomiya, Hyogo 662-8501
Japan

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