Does the Belt and Road Initiative Trigger Corporate Tax Avoidance? Evidence from a Quasi-Natural Experiment in China

Using a difference-in-difference (DID) model and a sample of Chinese listed firms, we examine whether the Belt and Road Initiative (BRI) affects tax avoidance. The results indicate that participating firms have significantly larger book-tax differences after implementing BRI, suggesting that tax avoidance is an unintended consequence of BRI. Our results are consistent across alternative sample periods and withstand both the parallel trend tests and placebo tests, and our conclusions remain unchanged after applying the instrumental variable method to mitigate endogeneity. Furthermore, the effect of BRI on tax avoidance is moderated by cash flow volatility, excessive debt, executive overseas background, tax rate differences, and tax regulatory environment. Our research provides important references for understanding the effect of BRI on tax avoidance.