Family Firms’ Aggressive Tax Planning: An Empirical Evaluation for Italy

This paper examines whether Italy’s family firms are more or less tax aggressive than their counterparts. To this end we exploit several data sources combining firm survey data, accounts data, and tax returns available for the years 1999–2006. Results indicate that family firms are more prone to engage in aggressive tax practices than their peers. Furthermore, from an agency perspective we find that when family owners increase their degree of ownership, the majority shareholder can use his or her controlling power to extract private benefits at the expense of minority shareholders, strengthening incentives for tax avoidance. Our results are robust after controlling for several firm characteristics, tax variables reflecting adjustments of book income due to differences between financial and tax accounting, and for different metrics of tax aggressiveness.