Does societal trust matter for corporate tax behaviors

This article employs a fixed-effect model to conduct empirical research on listed enterprises on the main boards of Shanghai and Shenzhen from 2004 to 2023. The study reveals a significant positive association between societal trust and corporate tax compliance. Additionally, we analyse the influences of firm-level and regional institutional factors on this relationship. Notably, the association is stronger in firms with poor corporate governance and less stringent regulation. Furthermore, our findings demonstrate that societal trust is positively linked to tax benefits, indicating that firms in regions with higher societal trust are eligible for greater tax benefits. Consequently, the positive and negative effects of trust on the tax burden offset each other, resulting in no overall increase in the corporate tax burden. In sum, our findings underscore the influence of societal trust on corporate tax behaviour and highlight the significance of informal institutions in promoting shared prosperity.