The Impact of “Golden Tax-III” Tax Collection and Management on the Audit Fees of Listed Companies

Li Zengfu; Zhu Jin

doi:doi:10.16538/j.cnki.fem.20210724.202

Home > All Issues > 2022 > No.01 > Article Details

The Impact of “Golden Tax-III” Tax Collection and Management on the Audit Fees of Listed Companies

Li Zengfu, Zhu Jin

Author Affiliations

Full Article | PDF Article(711.5 KB) View

9602

3634

Foreign Economics & Management Vol. 44, Issue 01, pp. 105 - 118 (2022) DOI:10.16538/j.cnki.fem.20210724.202

First published at:Jan 20, 2022

Summary

References

Summary

Tax collection and management, as an external governance tool for companies, can act on the operational aspects of companies, affecting the business and audit risks faced by auditors, thereby affecting the audit fees of companies. However, there is currently little literature on the impact of tax collection and management on the audit fees of companies. In view of this, this paper selects A-share listed companies from 2010 to 2019 as the research sample and uses the “Golden Tax-III” project as a “quasi-natural experiment” to empirically test the impact of tax collection and management with the application of big data on the audit fees of listed companies. We find that the “Golden Tax-III” project has increased the audit fees of listed companies. The mechanism analysis shows that the “Golden Tax-III” project has pushed up the actual tax rate of listed companies and reduced the profitability of listed companies, increasing the business risks of auditors, thereby increasing audit fees. Meanwhile, the enhanced supervision of tax-related information has also improved the quality of corporate accounting information, reduced the audit risk of auditors, and thereby reduced audit fees. Comprehensively speaking, the former has a greater impact on audit fees than the latter, leading to an increase in audit fees of listed companies. Further analysis finds that the impact of the “Golden Tax-III” project on audit fees is more significant among non-state listed companies and listed companies audited by non-international big four accounting firms.

The possible contributions of this paper are as follows: First, to distinguish it from previous studies, this paper examines how tax collection and management affects the audit fees of companies for the first time. Taking external tax collection and management as the entry point, it empirically examines the impact of the “Golden Tax-III” project on the audit fees of listed companies, and explores how the auditor’s business risk and audit risk play a role in the mechanism, thus expanding the research horizon on the factors affecting audit fees. Second, along the line of literature that tax collection and management can affect tax burden and strengthen company governance, this paper further investigates the impact of tax collection and management on audit fees and reveals the mechanisms from two paths, enriching the research literature on the economic consequences of tax collection and management. Third, the conclusions of this paper have certain policy implications. This paper finds that tax-related information regulation strengthened by tax departments, on the one hand, improves the quality of companies’ accounting information and helps to reduce audit fees; on the other hand, it raises companies’ effective tax rate, deteriorates their business performance, and ultimately leads to higher audit fees, which further weakens the dividends of current tax reduction policies. The results suggest that, while strengthening tax supervision, tax departments should cooperate with further tax and fee reductions to reduce the tax burden of companies and promote their development.

Keywords

“Golden Tax-III” project; tax collection and management; audit fees; corporate governance

[1] Bai Yunxia, Tang Weizheng, Liu Gang. Tax plans and the corporate tax burden[J]. Economic Research Journal，2019, 54(5): 98-112.

[2] Chen Deqiu, Chen Yunsen, Dong Zhiyong. Policy uncertainty, tax administration intensity and corporate tax avoidance[J]. Management World，2016, 32(5): 151-163.

[3] Fan Yong, Li Haonan. Tax administration, tax compliance and tax preferences: Evaluation of the policy effect of the third phase of the golden tax project[J]. Finance & Trade Economics，2020, 41(5): 51-66.

[4] Fan Ziying, Peng Fei. The effects of “Business Tax Replaced with VAT reform” on firms’ tax cuts and industrial division based on the perspective of industrial interconnection[J]. Economic Research Journal，2017, 52(2): 82-95.

[5] Li Yan, Yang Wanxin, Chen Binkai. Tax enforcement, tax burden level and fairness[J]. China Industrial Economics，2020, (11): 24-41.

[6] Sun Xuejiao, Zhai Shuping, Yu Su. How does big data in tax enforcement affect corporate earnings management? —Evidence from a quasi-natural experiment on the “Third Phase of Golden Tax Project”[J]. Accounting Research，2021, (1): 67-81.

[7] Tan Qing, Bao Shuchen. Can book-tax differences influence audit fees? —From the perspective of earnings management and tax avoidance[J]. Auditing Research，2015, (2): 81-88.

[8] Wang Weitong, Li Xiuhua, Lu Yi. Tax reduction incentives and corporate debt burden: Evidence from the policy of halving the Income tax on small low-profit enterprises[J]. Economic Research Journal，2020, 55(8): 105-120.

[9] Ye Kangtao, Xiu Xing. Tax administration, income tax costs and earnings management[J]. Management World，2011, (5): 140-148.

[10] Zhai Shengbao, Xu Haoran, Liu Yaosong. Controlling shareholder equity pledge and auditor risk response[J]. Management World，2017, (10): 51-65.

[11] Zhang Kezhong, Ou Yangjie, Li Wenjian. Why Tax cuts cannot reduce the corporate burden: Information technology, taxation capacity and corporate tax evasion[J]. Economic Research Journal，2020, 55(3): 116-132.

[12] Zhang Min, Liu Yaosong, Wang Xin, He Xuan. Business and tax office as neighbors: Facilitate tax avoidance or facilitate tax collection? [J]. Management World，2018, (5): 150-164.

[13] Li W F, Pittman J A, Wang Z T. The determinants and consequences of tax audits: Some evidence from China[J]. Journal of the American Taxation Association,2019, 41(1): 91-122.

[14] Petherbridge J, Messier Jr W F. The impact of PCAOB regulatory actions and engagement risk on auditors’ internal audit reliance decisions[J]. Journal of Accounting and Public Policy,2016, 35(1): 3-18.

[15] Pomeranz D. No taxation without information: Deterrence and self-enforcement in the value added tax[J]. American Economic Review,2015, 105(8): 2539-2569.

Cite this article

Li Zengfu, Zhu Jin. The Impact of “Golden Tax-III” Tax Collection and Management on the Audit Fees of Listed Companies[J]. Foreign Economics & Management, 2022, 44(1): 105-118.