论文笔记 | The Political Dynamics of Corporate Tax Avoidance: The Chinese Experience

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Chen H, Tang S, Wu D, et al. The Political Dynamics of Corporate Tax Avoidance: The Chinese ExperienceThe Political Dynamics of Tax Avoidance[J]. The Accounting Review, 2021.

故事：One fundamental institution behind China’s economic growth has been the combination of economic decentralization and political centralization (Xu 2011). 在经济放权和政治集权的背景下，地方官员展开了一场围绕GDP竞争的锦标赛。基于此，这篇文章从基建狂魔的角度入手，分析了基建在地方经济增长增长和官员晋升中发挥着重要作用，但与此同时需要投入巨大的财力。与此同时，一方面，在地方债务高积的背景下，发改委更是加强了对地方基建项目的审核，只有健康的财政，地方政府才能开展基建项目。另一方面，基建的建设和完成耗时长，地方官员要想利用基建来提升自己的政绩，就需要率先投资。为此，文章利用DID，三种DID等方式，研究了官员变更第一年与地方税收的关系。具体而言，官员变更第一年，地方官员为了凑集财政资金，可能会对有影响的企业加大税收，之后对其补偿。

1 Introduction

To stimulate investments and boost local economies, Chinese local leaders have a proclivity toward expanding spending on transportation and urban infrastructures (Shen et al. 2012). By showcasing their achievements, officials adept at orchestrating infrastructure investment and urban development are significantly more likely to be promoted (Chen and Kung 2016; Wu et al. 2014).

To fund new infrastructure projects, local officials must seek ways to relax budget constraints. They are thus inclined to increase tax revenues to maximize fiscal resources upon appointment.

推导：增大税收不能是长期的，更可能是短期的，上台第一年：Although such an inclination appears to be perpetual, for two reasons,== it is most pronounced when an official assumes office.== First, a healthy fiscal position justifies the additional expenditures on infrastructure. An official must secure sufficient financial resources and launch such projects early so s/he can demonstrate performance by the end of his/her term (officially five years). Second, tax levies impose a cost on firms. Taxing firms relentlessly when accomplishing political objectives would be unwise for an official.

推导：这是税收影响对象更可能是地方政府能够控制的国有企业“subordinate SOEs” 。

• Local leaders can influence SOEs in their jurisdictions by exercising control rights and administrative power; being well connected to government officials, SOE managers are also likely to curry favor with incumbent officials by increasing tax payments.
• By contrast, non-SOEs, controlled by private entities or individuals, may avoid more taxes because owners benefit more from the savings. Also, because they are not embedded in the bureaucratic network, non-SOEs have fewer opportunities to build and sustain long-term connections with local officials (Uzzi 1996).
• Moreover,Government officials are in a better position to command favors from SOE managers if the former have a higher status in the hierarchy and thus may influence the latter’s career advancement (Tullock 1965). By contrast, an SOE manager would derive little benefit from supporting a lower-ranking local political leader.
  

2 Institutional Background

• The fiscal and taxation system and corporate tax avoidance in China

(1)Income-tax revenue is thus one of the major sources of local government fiscal revenues

(2)To balance budgetary revenues and expenditures, the local governments are highly dependent on tax revenues for their fiscal spending (Jin and Zou 2003; Shen et al. 2012).

• Cadre evaluation system and political promotion in China

• Political promotion, infrastructure investments, and corporate tax policy

(1)Prioritizing economic metrics in cadre promotion thus incentivizes local officials to increase infrastructure investments.
(2)To launch new infrastructure projects, however, a newly appointed official may confront the difficulty of financing.
(3)Moreover, major infrastructure projects must be endorsed by the National Development and Reform Commission , the regulatory agency in charge of China’s macroeconomic planning.
(4)income tax is more complex in terms of both reporting and collecting. Also, income-tax administration and enforcement in China can be subjective and selective due to the considerable leeway offered by tax laws and rules.

• Empirical predictions (两种观点)
  （1）uniform imposition：all the firms in the new leader’s jurisdiction are likely to undertake less aggressive tax positions after the political turnover.
  （2）favor exchange：the effect of political turnovers on local firms’ tax avoidance will be concentrated among firms in the leaders’ sphere of influence.

3 Sample and research methods

sample period：2002-2012
we have 13,023 firm-year observations in the final sample

征税力度（DETR）：有效税率减去母公司的法定税率

官员变更：focus on city-level political leaders.

model:

4 Empirical results

1. Descriptive statistics and main regression results

2. Propensity score matching : apply the propensity score matching (PSM) to align the treated with control firms in the distributions of covariates, or relevant attributes other than the shock itself.

3. Tax enforcement: 进一步排除uniform imposition 观点
   
   

4. Robustness checks

5. Variation in the effect of political turnover on tax avoidance：analyze whether the political-turnover effect on tax avoidance varies by firm or politician attributes.
   
   

5 Further analyses

1. Favor exchange between the SOE managers and political leaders

又给企业提供津贴，会不会把之前收的税又还回去了？Government fiscal revenues and expenditures fall along separate budget lines, and a certain amount of fiscal expenditures are routinely budgeted for subsidizing local firms. Granting more subsidies to a group of firms is
therefore not tantamount to refunding additional tax payments to firms.

2. Wealth redistribution and social welfare implications

3. Alternative explanations：为了缓和公众的关注，企业选择多交税（firms subject to public or government scrutiny may take actions to preempt political backlash ）

6 Conclusion

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