Tax Avoidance Determinants : Evidence From Spanish Business Groups

We use static and dynamic panel data model specifications to address the relationship between business groups and tax avoidance, controlling for firm-specific and regional tax avoidance determinants.This paper aims to determine whether Spanish corporate groups and complex group networks have more aggressive tax policy than non-group companies.Our main results show that companies that belong to a corporate group tend to be tax avoidant. Moreover, our results indicate that businesses with complex group structures present lower effective tax rates (ETR). Finally, our findings show that tax-autonomous regions present lower corporate tax rates. Other control variables show expected results.There are different initiatives to unify the fiscal policies of EU and OECD members. Spain is an interesting case study of tax avoidance due to fiscal autonomy of certain regions such as Basque Country and Navarre, providing additional insights into tax avoidance determinants, relevant for regulators and policymakers.Tax avoidance is a controversial topic due to its ethical and social implications. Several authors show that socially responsible firms are less tax aggressive (e.g., Muller and Kolk, 2015; and Lanis and Richardson, 2012a). However, there is also evidence that tax savings benefit stakeholders, such as customers, through lower product prices (Cen et al., 2018).This study is the first to investigate the relationship between business groups and tax avoidance in Spain. We design an algorithm to identify business groups by merging all equity participation links contained in shareholder and subsidiary data of SABI database