Does Tax Avoidance Diminish Firms’ Sustainability?

Authors

  • Chika Saka Kwansei Gakuin University
  • Tomoki Oshika Waseda University
  • Masayuki Jimichi Kwansei Gakuin University)

DOI:

https://doi.org/10.14666/2194-7759-8-2-005

Keywords:

Tax avoidance, Sustainability, Effective tax rates (ETRs), Statutory tax rate

Abstract

Firm tax avoidance has gathered substantial public attention in both the real world and academic literature. Stakeholder theory suggests that firms need to maintain good relationships with all firm stakeholders to be sustainable. Although it makes the firm profitable (i.e., higher net income after tax) in the short run, tax avoidance may diminish the sustainability of firms. We thus examine the relationship between tax avoidance and sustainability. First, we find that
on the specific charts we draw, the location parameters of sustainable firms are clearly greater than those of others. Second, we examine the relationship between firm tax avoidance and financial sustainability using the LOGIT model and find that the effective tax rates (ETRs) of the firms are tied with their sustainability. Our results indicate that tax avoidance diminishes sustainability.

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Published

2020-03-14

How to Cite

Saka, C., Oshika, T., & Jimichi, M. (2020). Does Tax Avoidance Diminish Firms’ Sustainability?. Journal Global Policy and Governance, 8(2), 95-114. https://doi.org/10.14666/2194-7759-8-2-005