Proximity to tax bureaus: for the convenience of tax avoidance or tax collection?

Sep. 12,2019
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According to the principle of geo-economics, the geographical proximity between enterprises and tax bureaus may not only facilitate tax avoidance through rent-seeking (the distance-decay effect of rent-seeking cost), but also help tax bureaus strengthen tax collection and administration through obtaining more enterprise information (the distance-decay effect of information-seeking cost). Using the data of listed enterprises, we find that the enterprises geographically closer to the competent tax bureaus at the grass-roots level have a higher degree of tax avoidance, which supports the hypothesis of the distance-decay effect of rent-seeking cost, namely that the enterprises located closer to the competent tax bureaus face lower rent-seeking cost and are more capable of obtaining tax avoidance benefits through rent-seeking. Further research results show that this effect is more significant when the competent tax bureaus are state tax bureaus or the sample enterprises are private enterprises. After a series of robustness tests, the above conclusions are still valid. This paper enriches the literature on factors influencing corporate tax avoidance from a new perspective and provides new empirical evidence for the distance-decay effect of geo-economics.

Corresponding Author: ZHANG Min
CNKI Press Officer: ZHONG Ming

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