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3688An important action in the taxation area is to strengthen the normalization of tax enforcement in the processing of the construction of law-based government in China. Furthermore, the core of the normalization of tax enforcement is to establish and perfect the tax administrative penalty discretion standards. Based on the perspective of the tax administrative penalty discretion standards, on the one hand, the normalization of tax enforcement has fully absorbed the predisposing factors of tax enforcement, clarified the specific standards of taxation offences, strengthened the legal deterrence of tax enforcement, and reduced taxpayers’ subjective motivation of tax avoidance; on the other hand, the normalization of tax enforcement could improve the tax enforcement system to some extent, curb the rent-seeking possibility of the collusion between tax supervisors and firms, and further break the external environment of tax avoidance from the collusion through informal payments (e.g., business entertainment expenses) between taxpayers and tax supervisors. Therefore, an interesting and meaningful question is that, based on the perspective of tax administrative penalty discretion standards, how the normalization of tax enforcement restrains corporate tax avoidance behaviors.
The province-level practice of tax administrative penalty discretion standards constructs a quasi-natural experiment to explore the relationship between the normalization of tax enforcement and corporate tax avoidance. Based on the province-level practice of tax administrative penalty discretion standards, this study examines the effect of the normalization of tax enforcement on corporate tax avoidance. It shows that compared with the ex-ante period of tax administrative penalty discretion standards implemented in every province, in the ex-post period of tax administrative penalty discretion standards implemented in every province, the negative relationship is more pronounced between the normalization of tax enforcement and corporate tax avoidance. Moreover, the former relationship is more pronounced in firms with less financial reporting quality, lower internal control quality and more collusion between tax supervisors and firms. Further, the former relationship is also more pronounced in private and smaller firms. As a result, as tax administrative penalty discretion standards are implemented, the normalization of tax enforcement can decrease corporate tax avoidance.
This study makes several contributions as follows: First, based on the province-level practice of tax administrative penalty discretion standards, besides considering the traditional consequence of tax enforcement, this study also considers the effect of the normalization of tax enforcement from the predisposing perspective of tax administrative penalty discretion standards, broadens the horizon of tax enforcement research, and further enriches the relevant literature of tax enforcement. Second, this study broadens the horizon of the determinants of tax avoidance research, especially in the aspect of tax enforcement, and further enriches the relevant literature of the determinants of tax avoidance research. Third, this study reveals that the normalization of tax enforcement can optimize the external environment of listed firms’ governance and further offer beneficial implications for the fact that tax policies are implemented in the processing of the law-based government.
