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Anti-corruption campaign and corporate tax evasion: evidence from China

Author

Listed:
  • Dongmin Kong

    (Zhongnan Huazhong University of Economics and Law)

  • Yue Zhang

    (Huazhong University of Science and Technology)

  • Ni Qin

    (Huazhong University of Science and Technology)

Abstract

While the literature has well-documented economic consequences of corruption on economic development, whether and how corruption affects corporate tax evasion is unclear. This study uses anti-corruption investigations in China as an exogenous shock to local corruption to identify the link between corruption and firms’ tax evasion behavior in a difference-in-differences framework. We present strong evidence that the anti-corruption campaign has a negative effect on corporate tax evasion. One plausible explanation is that the anti-corruption campaign conducted by the central inspection team undermined the political umbrella of companies and increased the chances of local government-enterprise collusion being detected, thereby inhibiting tax avoidance. This effect is more significant among firms in provinces with high inspection intensity, firms in economically-developed regions, large firms and firms in politically-sensitive industries. Our findings enrich the existing studies on the economic and fiscal effects of anti-corruption campaigns.

Suggested Citation

  • Dongmin Kong & Yue Zhang & Ni Qin, 2025. "Anti-corruption campaign and corporate tax evasion: evidence from China," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 32(1), pages 1-50, February.
    • Handle: RePEc:kap:itaxpf:v:32:y:2025:i:1:d:10.1007_s10797-023-09777-x
    DOI: 10.1007/s10797-023-09777-x
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    More about this item

    Keywords

    Anti-corruption; Tax evasion; Difference-in-differences; China;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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