National culture and tax avoidance: a quantile regression analysis

Purpose - This paper aims to study the effect of Hofstede’s cultural dimensions (power distance, individualism, masculinity, uncertainty avoidance and long-term orientation) on corporate tax avoidance as proxied by the effective tax rate. Design/methodology/approach - A sample of 944 observations during 2016 was analyzed at three different quantiles (Q 0.25, Q 0.50 and Q 0.75) based on a quantile regression approach. Findings - Using Hofstede’s (2001) cultural dimensions (power distance, individualism, masculinity, uncertainty avoidance and long-term orientation), the authors find that individualism and masculinity are negatively associated with effective tax rates, and this negative relationship is more pronounced under low tax aggressiveness regime (third quantile). By contrast, long-term orientation is positively associated with the effective tax rate, and this relationship is more prevailing under aggressive tax regime (first quantile). These findings remain stable when using cash effective tax rate as an alternative measure for tax avoidance. Originality/value - This study adds to the extant literature a further understanding of the impact of cultural dimensions on tax avoidance. The use of quantile regression approach shows how the effect of masculinity, individualism and long-term orientation on tax avoidance varies under different tax management regimes.