The Relation Between Operational Efficiency and Tax Aggressiveness in Brazil

27 Pages Posted: 20 Feb 2019

See all articles by Antonio Lopo Martinez

Antonio Lopo Martinez

University of Coimbra; University of Salamanca

Eloy Paste Junior

Independent

Date Written: August 1, 2018

Abstract

This paper studies whether there is a relation between the operational efficiency measured through the Data Envelopment Analysis (DEA) models and the tax aggressiveness of the Brazilian public companies listed on B3 between the period of 2010 to 2015. The main hypothesis is that companies that are more operational efficient are in average less tax aggressive. Or, in other words, we predict that the less operational efficient companies have usually to engage in tax aggressiveness strategies more often. An efficiency score was calculated considering the outputs and inputs of the companies, classifying them according to the Data Envelopment Analysis (DEA) models to determine the relative company’s operational efficiency. The tax aggressiveness was measured by the difference between the Effective Tax Rates (ETR) and the average of ETR of companies from specifics economic sectors. Five relevant economic sectors were evaluated. A Data Panel model was estimated using the fixed effects. Considering the regression of all sectors, the results confirmed the hypothesis that companies that are more operational efficient in average tend to be less tax aggressive. However, when the samples were separated by sectors, only in the Energy and Textile Sectors this relation is significant.

Keywords: Tax Aggressiveness. Operational Efficiency. Data envelopment analysis (DEA)

JEL Classification: M41, M11

Suggested Citation

Martinez, Antonio Lopo and Paste Junior, Eloy, The Relation Between Operational Efficiency and Tax Aggressiveness in Brazil (August 1, 2018). Available at SSRN: https://ssrn.com/abstract=3327787 or http://dx.doi.org/10.2139/ssrn.3327787

Antonio Lopo Martinez (Contact Author)

University of Coimbra ( email )

Pátio das Escolas
Coimbra
Portugal

University of Salamanca ( email )

Campus Miguel de Unamuno
Salamanca, Salamanca 23007
Spain

Eloy Paste Junior

Independent ( email )

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