Overall tax avoidance and overall tax burden stickiness: the suppressing effect of R&D investment in China

It is important of tax burden stickiness to reveal the special phenomena that the operating conditions of enterprises are not synchronised with the changes of tax burden, but research on overall tax burden stickiness in emerging markets is relatively scarce. This study aims to investigate the suppressing effect of R&D investment on overall tax avoidance and overall tax burden stickiness of Chinese listed companies. We obtain the following conclusions: (1) Overall tax burden stickiness exists among listed Chinese companies. (2) Chinese listed companies have generally significant overall tax avoidance. (3) Overall tax avoidance has a significant positive direct effect, alleviating overall tax burden stickiness, but R&D investment partially offsets the positive influence of overall tax avoidance on overall tax burden stickiness, and the suppressing effect reaches 0.007. Our results illustrate that the implementation of tax planning for R&D projects can reduce R&D investment, so overall tax avoidance will deteriorate overall tax burden stickiness through R&D investment. Therefore, to improve resource utilisation efficiency and tax burden sensitivity to changes in revenue, tax planning should strike a balance between an effective reduction of R&D investment and alleviating tax burden stickiness as operating conditions fluctuate to achieve maximum tax benefits.

Automated summary

The study aims to investigate the suppressing effect of R&D investment on overall tax avoidance and overall tax burden stickiness of Chinese listed companies. The results show that overall tax burden stickiness exists among listed Chinese companies and they have generally significant overall tax avoidance. Overall tax avoidance has a significant positive direct effect, alleviating overall tax burden stickiness, but R&D investment partially offsets this effect. The study highlights the importance of tax planning in achieving maximum tax benefits while balancing effective reduction of R&D investment and alleviating tax burden stickiness.