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Corporate tax effects of economic policy uncertainty
Author(s) -
Kang Wensheng,
Wang Jing
Publication year - 2021
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12677
Subject(s) - economics , monetary economics , corporate tax , tax policy , cash , tax rate , tax reform , fiscal policy , public economics , macroeconomics , tax avoidance
We show consistent results that corporate cash tax burden within a year rises when economic policy uncertainty heightens using aggregate‐level data. Time‐varying tax effects of policy uncertainty are gradual and take time to induce corporate precautionary motives to engage in cash tax saving in the long run. Firm‐level analysis confirms that the tax effects of policy uncertainty are asymmetric and depend on underlying sources of monetary/fiscal policy uncertainty. The contemporaneous effect of monetary policy uncertainty on the cash effective tax rate is positive, whereas fiscal policy uncertainty shows a one‐year delayed negative effect on the cash effective tax rate.

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