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Title: Tax collector or tax avoider? An investigation of intergovernmental agency conflicts
Author(s): Chan, Koon Hung 
Author(s): Tang, T.
Mo, P. L. L.
Issue Date: 2017
Publisher: American Accounting Association
Journal: The Accounting Review 
Volume: 92
Issue: 2
Start page: 247
End page: 270
Local governments play dual, but conflicting, roles in China's tax system. That is, they are both tax collectors and controlling shareholders of firms subject to tax payments. We investigate how local governments balance their tax collection and tax avoidance incentives. We find that the conflicts between central and local governments arising from the 2002 tax sharing reform have led to more tax avoidance by local government-controlled firms, particularly when the local government's ownership percentage of the firms is higher than the tax sharing ratio. We also find evidence that the overall level of tax avoidance by local government-controlled firms in a region is positively associated with local fiscal deficits. As a high level of government ownership of corporations and intergovernmental tax sharing are common phenomena in many transitional economies, this study offers valuable insights into how the dual roles played by local governments affect tax policy enforcement in these economies.
DOI: 10.2308/accr-51526
CIHE Affiliated Publication: No
Appears in Collections:BHM Publication

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