TAX AVOIDANCE, BUSINESS GROUPS AND COMPLEXITY: EVIDENCE FROM SPAIN

36 Pages Posted: 20 Jul 2020 Last revised: 14 Apr 2021

See all articles by Aitor Garmendia-Lazcano

Aitor Garmendia-Lazcano

University of Deusto - Deusto Business School

Laura Baselga-Pascual

University of Deusto - Deusto Business School

Date Written: June 26, 2020

Abstract

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

Suggested Citation

Garmendia-Lazcano, Aitor and Baselga-Pascual, Laura, TAX AVOIDANCE, BUSINESS GROUPS AND COMPLEXITY: EVIDENCE FROM SPAIN (June 26, 2020). Available at SSRN: https://ssrn.com/abstract=3636412 or http://dx.doi.org/10.2139/ssrn.3636412

Aitor Garmendia-Lazcano

University of Deusto - Deusto Business School ( email )

Camino de Mundaiz, 50
San Sebastian, 20012
Spain

Laura Baselga-Pascual (Contact Author)

University of Deusto - Deusto Business School ( email )

Camino de Mundaiz, 50
San Sebastian, 20012
Spain

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