Can e-government services inhibit corporate tax avoidance? Evidence from China

While e-government is widely recognized for enhancing tax enforcement efficiency, its potential to drive voluntary corporate tax compliance has remained underexplored in existing literature. This study empirically examines the impact of e-government services on corporate tax avoidance, leveraging a quasi-natural experiment based on China’s "Internet Plus Government Services" pilot program implemented in 80 cities during 2016-2017. Using a difference-in-differences approach and panel data of Chinese A-share listed firms from 2008 to 2019, we find that the implementation of e-government services significantly inhibits corporate tax avoidance behavior, with treated firms in pilot cities exhibiting a substantial increase in effective tax rates relative to control firms. This core finding remains robust to a series of validity tests, including parallel trend checks, placebo tests, alternative tax avoidance measurements, and propensity score matching. Further mechanism analysis reveals that e-government services optimize the business environment by reducing firms’ administrative burden and rent-seeking costs, which enhances firms’ perceptions of reciprocity and fairness in social exchange with the government, thereby boosting their voluntary tax compliance and pro-social motivation. Heterogeneity analysis shows that the inhibitory effect of e-government services on tax avoidance is weakened for firms in regions with strong Confucian cultural influences but amplified for firms exposed to Western cultural factors. Additionally, the effect is insignificant for firms under intense capital market pressure, as such firms prioritize short-term financial performance over pro-social behavior. Supplementary tests confirm that e-government services not only curb tax avoidance but also promote corporate social responsibility, as evidenced by increased charitable donations among treated firms. This study contributes to the literature by uncovering the non-regulatory channel through which e-government shapes corporate tax behavior and validating the role of social exchange theory in explaining voluntary tax compliance. Practically, our findings highlight that e-government services can foster a collaborative government-firm relationship and generate public value, providing policy implications for governments to balance tax supervision with service-oriented governance to improve long-term tax compliance.