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

This version is forthcoming in REFC – Spanish Journal of Finance and Accounting

43 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 29, 2024

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

Suggested Citation

Garmendia-Lazcano, Aitor and Baselga-Pascual, Laura, THE ROLE OF REGIONAL TAX AUTONOMY, FIRM SIZE, AND BUSINESS GROUPS IN TAX AVOIDANCE: EVIDENCE FROM SPAIN  (June 29, 2024). This version is forthcoming in REFC – Spanish Journal of Finance and Accounting, 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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