＜Abstract＞

Analysis of the Relationship between Tax Avoidance and Tax Risk using Foreign Subsidiaries

Shin, Young Hyo & Jung, Kyu Eon

This study investigates the effect of tax avoidance on tax risk and analyzes whether the differences in corporate tax rates between countries and foreign sales affect tax risk.

The empirical analysis was conducted for the period from 2007 to 2016 for companies listed on KOSPI or KSDAQ. The data were extracted from the Korea Listed Companies Association’s DB TS2000 and 5,740 samples and 106 countries’ tax rate were used for analysis.

The analysis showed that the higher the tax avoidance level, the higher the tax risk. In addition, the tax risk decreases as the overseas corporate tax rate is higher than the domestic corporate tax rate and the tax risk increases as the amount of overseas sales increases.

The contribution of this study is that the relationship between tax avoidance level and tax risk, which showed different results from theoretical predictions in previous prior studies, was verified through empirical analysis in line with theoretical predictions. It is also meaningful that the effect of differences in corporate tax rates between countries and overseas sales on tax risk were analyzed for the first time.

▶ Key Words：　tax risk, tax avoidance, corporate tax rate, difference in tax rate, foreign subsidiary

** Published on December 2019
** Full article available in Korean only
** Download here →19-6 Analysis of the Relationship between Tax Avoidance and Tax Risk using Foreign Subsidiaries.pdf