Societal Trust and Corporate Tax Avoidance

Societal Trust and Corporate Tax Avoidance

Using an international sample of firms and a country-level index for societal trust, we study how differences in trust across countries relate to corporate tax avoidance. Consistent with our prediction, we find strong evidence that societal trust is negatively associated with corporate tax avoidance...

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Bibliographic Details
Main Authors: Kanagaretnam, Kiridaran, LEE, Jimmy, LIM, Chee Yeow, LOBO, Gerald J.
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2014
Subjects:
Trust
Tax Avoidance
Tax Systems
Formal Institutions
Informal Institutions
Accounting
Business Law, Public Responsibility, and Ethics
Corporate Finance
Online Access:https://ink.library.smu.edu.sg/soa_research/1288
https://ink.library.smu.edu.sg/context/soa_research/article/2287/viewcontent/Societal_Trust_and_Corporate_Tax_Avoidance.pdf
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Institution: Singapore Management University
Language: English
Description
Summary:Using an international sample of firms and a country-level index for societal trust, we study how differences in trust across countries relate to corporate tax avoidance. Consistent with our prediction, we find strong evidence that societal trust is negatively associated with corporate tax avoidance by firms, even after controlling for other determinants such as home country tax system characteristics. We also explore the effects of three country-level institutional characteristics – level of investor protection, disclosure requirement, and tax enforcement – on the relation between societal trust and tax avoidance. We predict and find that the effects of trust on tax avoidance are more pronounced when these institutions are weaker.

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