Journal of Law, Finance, and Accounting > Vol 4 > Issue 1

Tax Enforcement and Income Diversion: Evidence after Putin’s election in 2000

Juan Pedro Gomez, IE University, Madrid, Spain, juanp.gomez@ie.edu Maxim Mironov, IE University, Madrid, Spain, Maxim.Mironov@ie.edu
 
Suggested Citation
Juan Pedro Gomez and Maxim Mironov (2019), "Tax Enforcement and Income Diversion: Evidence after Putin’s election in 2000", Journal of Law, Finance, and Accounting: Vol. 4: No. 1, pp 35-65. http://dx.doi.org/10.1561/108.00000033

Published: 08 Oct 2019
© 2019 J. P. Gomez and M. Mironov
 
Subjects
Corporate finance: Corporate governance,  Taxation,  Political corruption
 
Keywords
JEL Codes: D73, G38, H26
Tax enforcementincome diversionspillover
 

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In this article:
1. Introduction
2. Analytical Framework
3. Data and Sample
4. Empirical Results
5. Interpretation and Alternative Explanations
6. Conclusion
Appendix: Sample of Companies with Corporate Governance Variables Sample Construction
References

Abstract

Using a direct estimate of income diversion for a large sample of Russian firms from 1999 through 2004, we show that an increase in tax enforcement after Putin’s election in 2000 is associated with a decrease in the appropriation of private rents by insiders both in firms explicitly targeted as tax evaders and among the largest firms in the sample. We interpret the latter as evidence consistent with a simultaneous spillover effect derived from the threat posed by tighter tax enforcement. This effect persists both economically and statistically in a subsample of listed companies after controlling for changes in firm-level corporate governance.

DOI:10.1561/108.00000033