Family Firms and Tax Aggressiveness in Brazil

This article investigates whether family firms are more aggressive in terms of tax planning than non-family firms in Brazil, based on a sample of firms listed on the BMF&Bovespa from 2001 to 2012. Chen, Chen, Cheng, & Shevlin (2010) define tax aggressiveness as management to reduce taxable income through tax planning activities. Of the sample of companies, 23% are considered to be family firms. We found a significant relationship between classification as a family firm and tax aggressiveness, based on two metrics. The first, effective tax rate (ETR), captures the actual taxes paid in relation to pre-tax earnings, while the second, book-tax differences (BTD), reflects the differences between accounting income and taxable income. The family firms in the sample were more tax aggressive than the non-family firms. For the variable BTD, family firms presented a positive sign, indicating a tendency for higher BTD. In turn, ETR had a negative sign, identifying a tendency for family firms to pay lower taxes.