Organizational structure and corporate tax burden in the absence of consolidated tax reporting
研究中国背景下，不允许合并纳税申报时，企业集团相比独立公司的整体税负更高，原因包括无法内部抵消盈亏、费用扣除受限及对未实现内部利润征税。
This paper examines the impact of the absence of consolidated tax reporting (CTR) on a business group’s overall tax burden, when compared to a standalone firm. Relying on a Chinese setting, where domestic income shifting opportunities exist, but CTR is not permitted, we find that business groups, considered as a single unit, exhibit a higher level of tax burden compared to standalone firms. Mechanism analyses suggest that this effect is largely driven by the inability to offset losses against profits across group members, limited deductibility of certain expenses, and the burden to pay taxes on unrealized internal profits. In additional analysis, we find that the tax disadvantage of business groups is mitigated for those with a greater ability to shift income. Overall, our research contributes to the literature examining the role of organizational structure on firms’ tax burdens and has important implications for policymakers around the world in defining the tax base of business groups.