Topic: Tax Consolidation Restrictions and the Effective Tax Burden of Business Groups

Speaker: Liangliang Wang

Date & Time: 9:30-11:00 Thursday, June 8,2023

Venue: Tencent Meeting (Meeting ID: 591 788 634)

Organizers: School of Accounting, Dongbei University of Finance and Economics, P.R. China & Liaoning Capital Market Finance and Accounting Graduate Innovation and Academic Exchange Center

Abstract:

The traditional view usually considers that business groups have the advantage of tax avoidance and lower tax burden, and some empirical evidence also shows that the tax burden of member companies belonging to the business group is lower than that of independent enterprises. Based on the strict restrictions imposed by Chinese tax laws on the tax consolidation of business groups, this article finds a conclusion that differs from previous literature: Compared to independent  enterprises, the tax burden of business groups is significantly higher. Under various robustness tests such as propensity score matching (PSM) and synthetic control method, this conclusion remains unchanged. The reasons behind the analysis reveal that when business groups have loss remedy restrictions (poor overall performance, loss of both parent company and subsidiaries, or inconsistent profit and loss of both parent company and subsidiaries), expense deduction restrictions (more advertising and promotion expenses, business entertainment expenses, etc.), and unrealized profits from insider trading, the difference in effective tax burden between them and independent enterprises is more significant. Further research also found that the difference between the two is relatively not significant in considering the effective tax rate of deferred income tax expenses and the long-term actual tax rate; In addition, when the number of subsidiaries in the business group is large, the proportion of parent company business is relatively low, and performance volatility is high, the difference between the two is more significant. The research findings of this paper not only provide new empirical evidence on the factors influencing the effective tax burden of business groups, but also enrich the academic literature in the field of economic consequences of business group operation, which also has inspiration significance on the reasonable definition of business group income tax base.

Introduction of Speaker:

Liangliang Wang, dean, associate professor and doctoral supervisor of the Department of Finance and Accounting of Southeast University. More than 40 academic achievements have been published in journals such as Economic Research Journal, Journal of Management World, Accounting Research, China Industrial Economics, Journal of Financial Research, Journal of Industrial Engineering and Engineering Management, and Pacific Basin Finance Journal. Has been selected as the National Accounting Leading Talent (Academic) of the Ministry of Finance, the "333 High level Talent Training Project" of Jiangsu Province, and the "Perfect Young Scholars" Funding Program of Southeast University (Class A). Presided over the projects of National Natural Science Foundation of China, the Philosophy and Social Science Research in Jiangsu universities, the National Statistical Science Research Institute, the Social Science Application Research in Jiangsu Province (financial special project), and the Fundamental Research Funds for Central Universities. Has won the Doctoral Candidate Award of the Ministry of Education, the Excellent Doctoral Thesis of Nanjing University, the Excellent Doctoral Thesis of Jiangsu Province, the Third Prize for Excellent Achievements in Philosophy and Social Sciences of Jiangsu universities, and the Third Prize for Excellent Achievements in Philosophy and Social Sciences of Jiangsu Province.

Special Attention:

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