Monitoring and Tax Planning – Evidence from State-Owned Enterprises

36 Pages Posted: 26 Jun 2020 Last revised: 11 Sep 2021

See all articles by Eva Eberhartinger

Eva Eberhartinger

Vienna University of Economics and Business

David M. P. Samuel

University of Wisconsin-Madison; Vienna University of Economics and Business

Date Written: September 9, 2021

Abstract

This study provides new evidence on the association of state ownership and tax planning by showing that a shareholder’s monitoring incentives affect a firm’s tax planning. Using the unique setting of the German fiscal federalism, where both the federal and local governments levy a significant corporate income tax, we distinguish between state owners that directly benefit from state-owned enterprises’ (SOEs’) income tax payments and those that do not. Our results indicate that state ownership is associated with less tax planning, but only for SOEs where the state owner directly benefits from higher tax payments. These results are robust to various specifications and suggest that shareholders’ monitoring incentives are a determinant of a firm’s tax planning activities. Our findings provide timely evidence on the current debate of the potential tax effects stemming from increases in state ownership around the world due to the COVID-19 pandemic.

Keywords: tax avoidance, monitoring, ownership Structure, state owned enterprises

JEL Classification: G30, G32, H26, H71

Suggested Citation

Eberhartinger, Eva and Samuel, David, Monitoring and Tax Planning – Evidence from State-Owned Enterprises (September 9, 2021). WU International Taxation Research Paper Series No. 2020-08, Available at SSRN: https://ssrn.com/abstract=3632938 or http://dx.doi.org/10.2139/ssrn.3632938

Eva Eberhartinger (Contact Author)

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna 1020
Austria

HOME PAGE: http://www.wu.ac.at

David Samuel

University of Wisconsin-Madison ( email )

975 University Avenue
Madison, WI 53706
United States

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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