IDEAS home Printed from https://ideas.repec.org/a/eee/poleco/v91y2026ics0176268025001521.html

Tax centralization, political connections, and corporate tax avoidance

Author

Listed:
  • Pan, Yang
  • Wu, Xihao

Abstract

This study investigates whether and how the tax centralization reform (TCR) affects the role of political connections in corporate tax avoidance. Using China's consolidation of the State Tax Administration (STA) and Local Tax Bureaus (LTBs) as a quasi-natural experiment, we find that TCR significantly diminishes the tax-reduction advantages traditionally afforded by political connections. More specifically, our analysis shows that the reform weakens the influence of local government political ties on corporate tax avoidance strategies. Heterogeneity analysis further reveals that the moderating effect of TCR is more pronounced in regions characterized by greater government intervention. Additional tests reveal that TCR also reduces the impact of political connections on firms' tax deviation and tax risk. Collectively, these findings highlight the institutional advantages of tax centralization in curbing politically driven tax avoidance, offering important implications for emerging markets seeking to enhance tax enforcement and governance.

Suggested Citation

  • Pan, Yang & Wu, Xihao, 2026. "Tax centralization, political connections, and corporate tax avoidance," European Journal of Political Economy, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:poleco:v:91:y:2026:i:c:s0176268025001521
    DOI: 10.1016/j.ejpoleco.2025.102792
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0176268025001521
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ejpoleco.2025.102792?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:poleco:v:91:y:2026:i:c:s0176268025001521. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505544 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.