Tax administration and audit fees: Evidence from China’s tax bureau merger

Using 22,508 observations spanning 2014–2020 regarding A-share-listed Chinese companies and the 2018 merger of national and local tax authorities as a quasi-natural experiment, this study extends the research boundary of tax administration to the capital market field. Furthermore, it empirically evaluates the optimization effect of the tax merger on China’s tax collection and administration system and explores its impact on the high-quality development of enterprises in terms of audit fees. The results show a significant reduction in corporate audit fees after the tax merger. Heterogeneity analysis reveals a pronounced inhibitory effect of the merger on audit fees in enterprises with poor internal governance (low executive shareholding ratio; weak equity balance) and insufficient external supervision (low internal control index; low institutional investor shareholding ratio). Mechanism tests confirm that the tax merger reduces audit fees through the following three channels: enhancing tax-collection intensity, improving corporate-information transparency, and mitigating operational risks. This study also provides micro-level empirical evidence for understanding the role of tax administration in corporate internal governance and high-quality development and offers significant implications for deepening China’s tax collection and administration system reform in the new era.