Tax avoidance in government-owned firms: Evidence from Italy. Issue 3 (3rd April 2019)

• Record Type: Journal Article
• Authors: Mafrolla, Elisabetta
• Is Part Of: Public money & management. Volume 39:Issue 3(2019)
• Page Start: 186
• Page End: 192
• Publication Date: 2019-04-03
• Subjects: Corporate income tax -- government-owned firms -- principal–agent–government conflict -- tax avoidance; Finance, Public -- Great Britain -- Periodicals; Great Britain -- Economic policy -- 1945-1964 -- Periodicals; 336.005
• DOI: 10.1080/09540962.2018.1516955
• Languages: English
• ISSNs: 0954-0962

Abstract

ABSTRACT: This paper studies whether and why government-owned firms avoid taxation to a greater extent than wholly privately-owned firms do. By considering a sample of Italian listed corporations for the period between 2006 and 2011, it was found that government ownership had a systematically negative effect on corporate effective tax rate, with a prevalence of tax-planning policies focused on the long term. Managers of local government-owned firms focused on minimizing costs, even if this was to the detriment of national tax-revenue collection. IMPACT: The author investigated tax avoidance in government-owned firms with the surprising finding that government owners avoid taxation to a greater extent than private sector owners. Managers of government-owned firms (and especially local government owners) were found to pursue political goals that focused on cost- minimizing policies, reducing national tax revenue. This paper will be of value to policy- makers, who should consider tax avoidance by government-owned enterprises as a real possibility.