THE ROLE OF REGIONAL TAX AUTONOMY, FIRM SIZE, AND BUSINESS GROUPS IN TAX AVOIDANCE: EVIDENCE FROM SPAIN 

Abstract

This paper investigates the influence of regional tax autonomy, firm size, and business group affiliation on corporate tax burden in a large sample of Spanish firms, including non-listed firms, from 2007 to 2016. Our findings reveal that firms located in tax-autonomous regions exhibit lower effective corporate tax rates (ETR), providing new empirical support for the horizontal tax competition theory. Additionally, we identify a positive relationship between firm size and corporate tax burden, aligning with the political cost theory. Furthermore, we find that group-affiliated firms face a higher ETR than independent firms, and that group affiliation attenuates the differences in the tax burden experienced by large and small firms.

Keywords: JEL classification: G30, H25, H26 M21, O52 Firm size, Business group, Corporate tax, Effective tax rate, Tax autonomy, Spain, Tax avoidance, Tax competition

JEL Classification: G30, H25, H26 M21, O52