E-government and corporate tax planning: International evidence

Beuselinck, Christof and Karavitis, Panagiotis and Kazakis, Pantelis and Mouna, Niswatil (2024): E-government and corporate tax planning: International evidence.

Abstract

This study examines the impact of e-government advancements on corporate tax planning activities. We define e-government as the readiness and capacity of national institutions to use information and communications technologies to deliver public services. Using over 82,000 worldwide firm-level data from 10,936 unique firms in 56 countries over the period 2008-2021, we observe a negative association between a country’s e-government advancement and the overall tax avoidance practices of firms. Via path analysis we identify the underlying mechanisms through which e-government affects corporate tax avoidance and document that the total tax enforcement budget but also specific technological features such as AI-machine learning, and robotic process automation explains a sizeable fraction of the negative relationship between e-government advancements and corporate tax avoidance. Additionally, our cross-sectional analysis reveals that the impact of e-government on curbing tax planning is particularly pronounced in environments where firms traditionally accrue tax benefits via investments into organizational capital. Our main findings remain robust after implementing an instrumental variables strategy and conducting various robustness tests. Collectively, our findings indicate that e-government investments can help raise a nation’s tax revenue collection, as such investments are linked to reduced corporate tax avoidance activities.

• Item Type: MPRA Paper
• Language: English
• Keywords: tax avoidance, tax planning, digitalization, e-government, digital governments
• Subjects: G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General; G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H26 - Tax Evasion and Avoidance; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M41 - Accounting; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M48 - Government Policy and Regulation

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