Customer Concentration, Tax Collection Intensity, and Corporate Tax Avoidance

We investigate the influence of customer concentration on corporate tax avoidance based on non-financial firms listed on Chinese stock exchanges over the period 2009–2014. Our results show that firms with higher customer concentration are more likely to engage in tax avoidance, and this effect is greater at conservative tax avoidance firms. We also find that tax collection intensity can significantly attenuate the positive relationship between customer concentration and tax avoidance, which is more pronounced at conservative tax avoidance firms. The significantly attenuating effects of tax collection intensity exist at firms in highly competitive industries, and firms with low environmental uncertainty. Our results also show that easing financing constraints is one way to reduce customer concentration’s influence on tax avoidance. This evidence indicates that customer concentration is an important cause of tax avoidance, and tax collection intensity is an effective external governance mechanism at firms with large customers.