Using the 2008 corporate tax reform in China as a quasi-natural experiment, we find that compared to unaffected firms, firms facing tax increases report significantly lower profit margins to avoid paying more taxes, while there is no significant difference for firms facing a tax cut. Our results...

Using the 2008 corporate tax reform in China as a quasi-natural experiment, we find a behavioral asymmetry. Compared to firms whose taxes were unaffected by the reform, firms whose tax rate increased reported significantly lower profit margins to avoid paying more taxes. However, firms whose tax...