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Natural disaster, fiscal pressure and tax avoidance: a typhoon-based study

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  • Liu Siyi
  • Weng Ruoyu
  • Yang Daoguang

Abstract

Natural disasters affect not only local economic development and government fiscal behaviour at the macro level, but also corporate tax avoidance behaviour at the micro level. From the perspective of typhoons, we investigate the effect of natural disasters on corporate tax avoidance behaviour based on the sample of China’s A-share companies from 2008 to 2015. Results indicate that the greater the damage caused by typhoons, the lower the level of tax avoidance of local companies, and this relationship is more significant in state-owned companies, political affiliates, and local leading companies, which is joined with path testing to show that natural disaster affects tax avoidance through fiscal pressure. In addition, we investigate whether this relationship varies cross-sectionally from several perspectives: institutional and economic environment, fiscal pressure, market pressure, and tax avoidance margin. Furthermore, we find that companies paying more taxes post-disaster will obtain more government grants and credit resources in the future, achieving mutual benefits between local governments and companies. In summary, this paper tests the effect of disasters on corporate tax avoidance behaviour based on China’s unique government-company relationship.

Suggested Citation

  • Liu Siyi & Weng Ruoyu & Yang Daoguang, 2017. "Natural disaster, fiscal pressure and tax avoidance: a typhoon-based study," China Journal of Accounting Studies, Taylor & Francis Journals, vol. 5(4), pages 468-509, October.
    • Handle: RePEc:taf:rcjaxx:v:5:y:2017:i:4:p:468-509
    DOI: 10.1080/21697213.2017.1429531
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    Cited by:

    1. Xiaojia Bao & Puyang Sun & Jianan Li, 2023. "The impacts of tropical storms on food prices: Evidence from China," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(2), pages 576-596, March.
    2. Athira, A. & Ramesh, Vishnu K., 2023. "COVID-19 and corporate tax avoidance: International evidence," International Business Review, Elsevier, vol. 32(4).
    3. Amin, Md Ruhul & Akindayomi, Akinloye & Sarker, Md Showaib Rahman & Bhuyan, Rafiqul, 2023. "Climate policy uncertainty and corporate tax avoidance," Finance Research Letters, Elsevier, vol. 58(PD).
    4. Athira, A. & Ramesh, Vishnu K., 2024. "Economic policy uncertainty and tax avoidance: International evidence," Emerging Markets Review, Elsevier, vol. 60(C).

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