The Political Dynamics of Corporate Tax Avoidance: The Chinese Experience
研究中国地方官员晋升激励如何影响国有企业避税行为，发现新领导上任后企业减少避税，以换取后续政府合同或补贴，形成双向利益交换。
ABSTRACT In China's political selection system, officials capable of growing local economies are rewarded with promotions. Eager to demonstrate economic achievements, newly appointed local leaders may raise tax revenues to expand fiscal expenditures on infrastructure projects. Against this backdrop, we study how political appointments influence local firms' tax planning. Based on a sample of locally administered state-owned enterprises (SOEs), we find that firms decrease their tax avoidance after new leaders take office. The political-turnover effect on these firms' tax positions is more evident when the incoming leaders have more political clout over SOE managers, the incentives to divert resources are stronger, or politician-manager networks are present, and subsides following the launch of the anticorruption campaign. Furthermore, firms with higher post-turnover tax payments subsequently receive more government contracts or subsidies. Overall, our findings suggest political incentives shape the tax-planning activities of SOE managers in a “two-way favor exchange” manner. JEL Classifications: H26; E32; P26; G30.