Tax risks control and sustainable development: evidence from China

Abstract

Purpose Tax risks are common in China but often ignored by enterprises. Determining how to measure tax risks and effectively identify and control influencing factors is the key to the sustainable development of enterprises. This study aims to explore the key factors affecting corporate tax risks and analyze influencing factors from external and internal perspectives. Design/methodology/approach After selecting a data set comprising 11,503 firm-year observations of Chinese firms in the Shanghai and Shenzhen Stock Exchanges from 2008–2017, this study applied a panel regression model to identify the factors’ impact. Findings The results indicate that the more standardized the institutional environment and stronger the tax supervision, the lower the tax risks. Taking into account the internal factors of a firm, private companies with political connections have lower tax risks than those without. Originality/value This study enriches the literature on the factors affecting tax risks. The conclusion provides significant insights for enterprises to effectively control tax risks and maintain sustainability. The research findings also provide a new perspective for the government to guard against corporate risks and maintain the stable development of the economy.