Original scientific paper
https://doi.org/10.1080/1331677X.2022.2106283
Country-by-country reporting and corporate tax avoidance: evidence from China
Laimi Yang
Abstract
In 2016, China implemented the country-by-country reporting
(CbCR) rule established by the Organization for Economic
Cooperation and Development. This study investigates whether
and how CbCR affects corporate tax outcomes. Employing difference-
in-difference models to analyse data from Chinese listed
companies during 2011–2019, we document an about 1.7 percentage
points increase in effective tax rates among affected
firms. We further find that CbCR discourages tax avoidance
caused by related party transactions, and its effects vary among
different types of related party transactions. Additional analysis
shows that CbCR has a greater influence on firms with lower
information transparency and higher tax risk. Finally, CbCR
changes the profit distribution of multinational companies, leading
to a reduction in the proportion of headquarters profits. The
results are robust to various measurements of tax avoidance, placebo
test, and parallel trends test. To the best of our knowledge,
this study is one of the first to examine the association between
CbCR and corporate tax avoidance in China. Overall, the findings
enrich the theoretical mechanism of CbCR and provide implications
for China’s participation in global tax governance.
Keywords
Country-by-country reporting; tax avoidance; related party transaction; tax transparency; China
Hrčak ID:
306631
URI
Publication date:
30.4.2023.
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