The effect of the general anti-avoidance rule on corporate tax avoidance in China

Sidney C.M. Leung*, Grant Richardson, Grantley Taylor

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

6 Citations (Scopus)

Abstract

This study examines the effect of the general anti-avoidance rule (GAAR), introduced on January 1, 2008, to enforce corporate tax avoidance laws in China. Based on a sample of 517 Chinese firms over the 2006–2010 period (2585 firm-years), we find a reduction in tax avoidance following the implementation of the GAAR that appears to be the result of the new and stringent tax legislation and the consolidation of Chinese tax law. We also observe that the effects of firms’ engaging a Big Four auditor and directors with tax expertise in deterring tax avoidance significantly decreased following implementation of the GAAR. To all intents and purposes, it seems that the implementation of the GAAR in China has moderated the effects of and substituted for these particular monitoring and disciplining mechanisms.

Original languageEnglish
Pages (from-to)105-117
Number of pages13
JournalJournal of Contemporary Accounting and Economics
Volume15
Issue number1
DOIs
Publication statusPublished - 1 Apr 2019

Keywords

  • China
  • Corporate tax avoidance
  • General anti-avoidance rule (GAAR)

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