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Offshore activities and corporate tax avoidance

Author

Listed:
  • Zhihong Chen

    (University of International Business and Economics [Beijing, China])

  • Ole-Kristian Hope
  • Qingyuan Li
  • Yongbo Li

    (Audencia Business School)

Abstract

We investigate the relation between tax avoidance and offshore activities using a new text-based measure for offshore activities based on Hoberg and Moon (2017, 2019). Our evidence shows that, although providing cross-border tax-avoidance opportunities, offshore activities reduce the marginal benefits of tax avoidance by introducing incremental foreign-market risk exposure. We find that the intensity of offshore sales of outputs is positively associated with the cash effective tax rate. The effect is stronger when the offshore sales rely on overseas production rather than domestic production, when the offshore sales are located in countries with higher economic uncertainty, when the firm has a lower ability to pass on shocks, and when the firm has less flexibility in adjusting tax strategies.

Suggested Citation

  • Zhihong Chen & Ole-Kristian Hope & Qingyuan Li & Yongbo Li, 2024. "Offshore activities and corporate tax avoidance," Post-Print hal-04535146, HAL.
    • Handle: RePEc:hal:journl:hal-04535146
    DOI: 10.1016/j.jcorpfin.2023.102536
    Note: View the original document on HAL open archive server: https://hal.science/hal-04535146
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    Keywords

    Offshore ac�vi�es Tax avoidance Uncertainty Flexibility Passing on shocks Tax uncertainty Mul�na�onal firms Offshore Activities Offshore activities tax avoidance uncertainty flexibility passing on shocks tax uncertainty multinational firms JEL Classification: G18 H26 M41; Offshore ac�vi�es; Tax avoidance; Uncertainty; Flexibility; Passing on shocks; Tax uncertainty; Mul�na�onal firms Offshore Activities Offshore activities; tax avoidance; uncertainty; flexibility; passing on shocks; tax uncertainty; multinational firms JEL Classification: G18; H26; M41; Offshore activities; Multinational firms;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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