Tax avoidance, state control and firm financial constraints: empirical evidence from a developing country

State controlled firms enjoy tax preferential treatments that may increase tax avoidance profit proportional to its cost. Bearing on this, the present study examines how state control affects tax avoidance practices and whether financial constraints moderate this relationship. Based on a sample of 248 Tunisian firms over the 2007-2022 period, we employ a GLS random-effect model with robust estimates, clustered by firm using different measures of tax avoidance and state control. The empirical analysis indicates that state control correlates negatively with tax avoidance practices. More important, the findings show that managers of state-controlled firms are not motivated to reduce tax expenses when they face financial constraints even in crisis period. These managers are constrained to protect government revenues useful to achieve socio-political objectives to the detriment of the firm performance.