TAX AVOIDANCE, BUSINESS GROUPS AND COMPLEXITY: EVIDENCE FROM SPAIN
36 Pages Posted: 20 Jul 2020 Last revised: 14 Apr 2021
Date Written: June 26, 2020
This paper examines the effect of business group affiliation and complexity on the tax avoidance activities of Spanish firms. Using firm-level data covering the period 2007-2016, we design an algorithm to identify business groups with shareholder and subsidiary data from the Sistema de Análisis de Balances Ibéricos (SABI) database. Our main results show that companies belonging to a business group tend to avoid more taxes. They also indicate that business groups with complex structures exhibit lower effective tax rates (ETRs). Finally, we find strong evidence that regions with tax autonomy show lower corporate tax rates. We use static and dynamic panel data model specifications to address the relationship between business groups, their complexity and their tax avoidance, controlling for firm-specific and regional determinants of tax avoidance.
Keywords: Business group, corporate tax, effective tax rate, group complexity, Spain, tax avoidance
JEL Classification: G30, H25, H26 M21, O52
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