The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1985-2517.htm

Corporate tax
The impact of the COVID-19 avoidance
pandemic on corporate tax
avoidance: evidence from S&P
500 firms
Sameh Kobbi-Fakhfakh Received 2 June 2022
Revised 18 August 2022
Economic and Financial Analysis and Modeling Research Unit (URAMEF), 30 October 2022
High Business School of Sfax (ESCS), University of Sfax, Sfax, Tunisia, and Accepted 12 December 2022

Fatma Bougacha
Faculty of Economics and Management, University of Sfax, Sfax, Tunisia

Abstract
Purpose – This study aims to examine the impact of the COVID-19 pandemic on corporate tax avoidance (TA).
Design/methodology/approach – This study used a panel data set of US publicly traded firms
listed in the Standard & Poor 500 index. Based on available information in the DATASTREAM
database covering the 2019–2021 period, three proxies for TA are used, namely the current effective tax
rate (CUETR), the cash effective tax rate and book-tax differences (BTD). Multiple regression models
including industry and year fixed effects are estimated. Additional analyses are performed using BTD
components i.e. temporary and permanent BTD, and testing the impact of the COVID-19 pandemic
across industries.
Findings – The results show that the outbreak of the novel coronavirus (COVID-19) affected positively the
CUETRs and negatively BTD, indicating a reduction in TA, in the postpandemic period. Further analyses
provide evidence that this effect is the same, regardless of the degree of industry failure probability, but it is
more driven by the reduction of deferred tax expenses (temporary BTD component). These findings suggest
that the US publicly listed firms have experienced a serious drop in their income in the postpandemic period,
following the markets closure and the quarantine periods that hampered business. Therefore, with lower
profits, they are not willing to evade taxes.
Social implications – This paper enriches taxation research during economic crises. The research
findings have important policy implications. On the one hand, the fiscal policy should stimulate growth to
allow firms to tackle the challenges they confronted post-COVID-19. On the other hand, the global economic
crisis caused by the pandemic has led to a major deterioration in public finances and has raised inequalities
across households. Therefore, it would be necessary to review public fiscal policies to achieve a balance of
equity, growth and sustainability. In this context, tax reform focusing on tax progressivity could counter in
part the negative economic effects of the COVID-19 pandemic and led to economy recovery.
Originality/value – This study contributes to the growing body of literature on the COVID-19 effects with a
special focus on corporate practices. This study provides first evidence on the effect of the COVID-19 pandemic on
manager’s behavior from taxation perspective. This study also enriches taxation research during economic crises.
Keywords Pandemic, COVID-19, Crisis, Tax avoidance, Effective tax rate, Book-tax differences
Paper type Research paper

1. Introduction
The infection with SARS-CoV-2, also known as COVID-19 or coronavirus, was first reported Journal of Financial Reporting and
Accounting
in Wuhan, China, in December 2019. This epidemic spread quickly across the world and © Emerald Publishing Limited
1985-2517
became a global pandemic as declared by the World Health Organization (WHO) on DOI 10.1108/JFRA-06-2022-0216
JFRA March 11, 2020. The USA is one of the hardest hit countries by this pandemic which caused
a health crisis and triggered an economic crisis that led to a recession (Ozili and Arun, 2023).
Recent literature has highlighted the effects of the COVID-19 pandemic on several
aspects such as corporate performance (Shen et al., 2020; Achim et al., 2021), firm policy
related to investment, financing, cash holdings and dividend payouts (Jebran and Chen,
2022), stock markets (He et al., 2020; Haroon and Rizvi, 2020), financial reporting and audit
activity (Crucean and Hat egan, 2021; Elmarzouky et al., 2021a; Elmarzouky et al., 2021b)
and earnings management (Lassoued and Khanchel, 2021; Liu and Sun, 2022).
In this study, we presume that the COVID-19 pandemic affects the managerial tax
avoidance (TA) strategies. Brondolo (2009) argued that the global financial and economic
crisis presents major challenges for collecting taxes by tax administration given the
economic recession. He asserted that “one of the main factors that could cause revenue to
decline in relation to Gross Domestic Product (GDP) is the possibility of changes in
taxpayers compliance” (Brondolo, 2009, p. 5).
Drawing on insights from the institutional theory, corporate practices depend on the
institutional environment within which firms operate (Zucker, 1987; Lassoued and
Khanchel, 2021). Accordingly, firms may change their tax compliance behaviors during the
economic crisis caused by the COVID-19 pandemic. There could be two scenarios related to
tax compliance behavior during an economic downturn.
On the one hand, in a crisis period, firm can suffer a severe income drop. Particularly,
Shen et al. (2020) found that the COVID-19 pandemic has a negative and significant impact
on firm performance. In a report published by the Institute on Taxation and Economic
Policy (ITEP), Hanauer (2021) testified that many US firms reported losses in 2020 because
the pandemic has been hard. But firms that have reported profits, even record profits, have
avoided taxes. Based on the Allingham and Sandmo’s (1972) benchmark model, Brondolo
(2009) argued that a decrease in income leads to improved tax compliance given that the
taxpayer’ relative risk aversion is normally assumed to increase and, then, taxpayer may
become less incentivized to escape taxes.
On the other hand, tax compliance behavior could be explained by the economic
deterrence models which focus on the cost–benefit framework (Walsh, 2012). Indeed, when
taxpayer faces serious economic stress, in a crisis period, as, for example, credit default risk
or bankruptcy, he will engage in TA strategies as an alternative source of finance to cope
with the adverse effects of the crisis. According to Brondolo (2009), this behavior could be,
also, reinforced by social norms when the taxpayer becomes aware of the decrease in the tax
laws enforcement level, in a crisis period, as well as he sees other people evade taxes making
this behavior more socially acceptable.
Empirical evidence on the impact of economic crisis on taxpayer compliance is scarce
(Plumley, 1996; Cai and Liu, 2009; Richardson et al., 2015; Nguyen and Nguyen, 2020; Shen
et al., 2021) and has provided mixed results. Furthermore, to the best of our knowledge,
research on TA during the COVID-19 pandemic is not yet examined. This study aims to fill
this gap in the literature and tests whether the COVID-19 pandemic has an effect on
corporate TA in the US context.
To achieve this purpose, we selected a sample of US publicly traded firms listed in the
Standard & Poor (S&P) 500 index. Based on information available in the DATASTREAM
database covering the period 2019–2021, we used three proxies for TA, that is, the current
effective tax rate (CUETR), the cash effective tax rate (CAETR) and book-tax differences
(BTD).
We believe this study contributes to the tax and COVID-19 literature in three important
ways. First, it extends the growing body of literature on corporate TA by examining this
behavior during a crisis period characterized by an increased economic uncertainty affected Corporate tax
by the surge of COVID-19. Results showed an increase in the CUETR and a decrease in BTD avoidance
suggesting a reduction in TA. Second, to the best of our knowledge, this research provides
the first evidence on the effect of the COVID-19 pandemic on manager’s behavior from
taxation perspective. Prior studies have examined manager’s behavior by focusing on
earnings management during the COVID-19 pandemic period (Lassoued and Khanchel,
2021; Liu and Sun, 2022). This research adds to these studies by focusing on a very narrow
aspect, that is, TA. Results suggest that the economic concerns caused by the pandemic,
including income drops, outweigh the propensity of US firm’s manager to evade taxes.
Third, this study enriches the literature examining the economic consequences of the
COVID-19 pandemic.
The rest of the paper is structured as follows. Section 2 presents background. Section 3
reviews prior literature and develops the research hypothesis. Section 4 describes the
research design. Section 5 presents and discusses the main empirical findings. Section 6
provides additional analyses. Section 7 concludes.

2. Background
The COVID-19, which started with the determination of the first case of illness in Wuhan,
spread to all countries of the world in a short time because of human movement. This
pandemic has profoundly shaken the human health and the economic situation worldwide.
The population mobility was greatly reduced because of the quarantine policy, resulting
in weakened purchasing power and a stagnant economy. At the macrolevel, the COVID-19
outbreak caused the worst global recession since 1930, when the economy got absolutely
crushed (Shen et al., 2020). As of April 2020, the US economy had lost nearly 21 million jobs,
by far the largest drop on record and more than double the cumulative loss during the 2008–
2009 global financial crisis [Economic Commission for Latin America and the Caribbean
(ECLAC), 2020]. In addition, the containment of billions of people by the coronavirus has had
severe impact on the global socio-economy.
Furthermore, the COVID-19 pandemic seriously affected financial markets. After the
WHO declared COVID-19 as a global pandemic, all the world’s stock exchanges suffered
significant losses in value, for example, for the first quarter of 2020, the S&P 500
experienced the biggest decline since 2008 (20% loss based on the daily closing prices)
(ECLAC, 2020).
In the USA, the pandemic interrupted more than a decade of economic growth, despite
the fact that the economic policy response to the COVID-19 pandemic has been substantial
and immediate. In response to the pandemic, for example, the US Congress passed three
laws in the month of March 2020. One of these laws (March 25, 2020) is the Coronavirus Aid,
Relief, and Economic Security Act which, along with social measures, includes fiscal
measures like delay in tax deadlines. So, businesses can delay making their quarterly
estimated tax payments until October 15, 2020 and defer payroll tax payments until the end
of the year (ECLAC, 2020). This fiscal measure during pandemic may be have an impact on
the corporate behavior face-to-face tax.
Focusing on fiscal behavior, Laffitte et al. (2020) argued that the crisis caused by the
COVID-19 pandemic reveals that public welfare needs, including health services and public
infrastructure, have been underfunded in many countries, which may be largely because of
corporate tax aggressiveness. Prior literature has supported this view and has shown that
US firms have been accused of exploiting loopholes in tax legislation to avoid taxes
(Rego, 2003; Hanlon and Heitzman, 2010; Armstrong et al., 2012; Jaafar and Thornton, 2015;
Joshi, 2020). However, little is known about the challenges companies face during this period
JFRA of crisis and how they cope with them. Therefore, taking into account the institutional
background, this study explores the TA behavior of US firms during the COVID-19 health
crisis.

3. Literature review and hypothesis development

3.1 Economic effects of the COVID-19 pandemic: a literature review
In a process where globalization has accelerated its spread at full speed, the health crisis,
that is, the COVID-19, pandemic has turned in an economic crisis around the world,
regardless of developed or developing countries (Padhan and Prabheesh, 2021; Barai and
Dhar, 2021; Ozili and Arun, 2023). Indeed, throughout the pandemic period, many of the
world’s production facilities ceased production, households closed their homes and a
situation of general uncertainty arose, leading to an unexpected decrease in product
demand, which in turn led to a sharp drop in prices. This economic downturn has resulted in
significant disruptions to business and a significant increase in economic uncertainty (Ozili
and Arun, 2023; He et al., 2020).
Recent studies have highlighted the effects of the COVID-19 pandemic on several aspects
(Shen et al., 2020; Achim et al., 2021; Jebran and Chen, 2022; He et al., 2020; Haroon and Rizvi,
2020; Crucean and Hat egan, 2021; Elmarzouky et al., 2021a; Elmarzouky et al., 2021b;
Lassoued and Khanchel., 2021; Liu and Sun, 2022). They can be drawn into three lines of
research.
The first line of research examines the impact of the COVID-19 pandemic on corporate
performance, firm policy and stock markets. In China context, Shen et al. (2020) found a
negative and significant impact of COVID-19 on firm performance, and this impact is more
pronounced when a firm’s investment scale or sales revenue is smaller. As additional
analyses, they tested this impact along two dimensions, that is, industry and region. Results
showed that the negative impact of COVID-19 on firm performance is more pronounced in
serious-impact regions and industries. By using a panel data analysis of Romanian listed
companies belonging to different sectors, from June 30, 2019 to June 30, 2020, Achim et al.
(2021) revealed that equity financing, proper liquidity management and firm size consolidate
the economic firm performance in terms of return on equity and return on assets. In addition,
they found that all service sectors such as hotel and restaurants, pharmaceuticals and real
estate experienced significant declines during the analyzed period. By studying the impact
of managerial ability on firm policies during the COVID-19 crisis, Jebran and Chen (2022)
found that firms with more competent managers reduce their investment, financing and
cash flow, while increasing their dividend payments. In addition, firms with more competent
managers outperform other firms during the pandemic. Their results highlight managerial
capability as a key determinant of firms’ policies and performance during the COVID-19
crisis. He et al. (2020) used an event study from December 30, 2019 to January 23, 2020 to
examine the impact of the COVID-19 pandemic on the Chinese stock market. They found
that the pandemic negatively impacted stock prices on the Shanghai Stock Exchange,
whereas it positively impacted the stock prices on the Shenzhen Stock Exchange. They
suggested that the COVID-19 hits the traditional industries of China negatively and more
seriously but created opportunities for the development of high-tech industries. In the same
vein, Haroon and Rizvi (2020) found that the panic induced by COVID-19-related news is
positively associated with the volatilities of the indices of several industry sectors.
Specifically, the association is more pronounced in the transportation, automobiles and
components, energy and travel and leisure industries.
The second line of research suggests that COVID-19 has an impact on financial reporting
and audit activity. Crucean and Hat egan (2021) examined the effects and subsequent events
following the COVID-19 pandemic, both at the level of financial reporting and at the level of Corporate tax
audit activity. By analyzing annual reports of a sample of firms listed on the Bucharest avoidance
Stock Exchange for the financial year 2019, they identified two categories of subsequent
events occurred as a result of the COVID-19 pandemic:
(1) events that did not adjust the financial statements, in which case the analysis of
uncertainties and risks to which the entity is exposed was included in the
explanatory notes and the directors’ report; and
(2) subsequent events that lead to the adjustment of the annual financial statements.

They, also, concluded that the COVID-19 pandemic has produced numerous changes in
financial reporting as well as in the conduct of the planned audit activity because of
limitation of business travel.
By focusing on COVID-19 disclosures, Elmarzouky et al. (2021a) constructed a unique
measurement for assessing the level of COVID-19 disclosure using a wordlist based on the
“COVID-19 Secure Guidelines” published by the UK Government. By selecting a sample of
UK FTSE-All share nonfinancial firms for the financial year 2019, they documented a
significant variation of COVID-19 disclosure across industries. Furthermore, they found a
positive association between the level of COVID-19 disclosure and uncertainty within
annual reports. By conducting a robustness check, they showed that this association is more
pronounced for firms with larger boards but less strong for firm with a higher percentage of
independent directors. In a complementary study, Elmarzouky et al. (2021b) investigated the
association between COVID-19-related information and the level of performance disclosure
in annual reports. They, also, tested whether corporate governance mechanisms, that is,
board size, board independence and gender diversity, moderate this association. To measure
the level of the COVID-19 information and performance disclosure, they adopted an
automated textual analysis. Results found showed that COVID-19-related information is
associated with a higher level of performance disclosure and this association is more
pronounced for firms with larger boards, with higher percentage of board independence and
with a higher number of women on board. The authors concluded that manager tends to
provide more information about firm performance because they can use such information to
signal to stakeholders and markets their ability to respond to the COVID-19 pandemic and
to provide more assurance about the firm future performance.
The third line of research focuses on earnings management during the COVID-19
pandemic period based on the theoretical framework of institutional, agency and signal
theories. Examples of studies that fit into this line of research include Lassoued and
Khanchel (2021) and Liu and Sun (2022). Lassoued and Khanchel (2021) used a sample of
2,031 listed companies in 15 European countries to test the impact of the COVID-19
pandemic on earnings management. They found that firms tend to manage earnings
upward during the postpandemic period (from the first quarter to the fourth quarter of 2020)
than during the prepandemic period (from the first quarter of 2017 to the fourth quarter of
2019). They explained their results by the fact that firms are willing to mitigate the level of
reported losses, in the COVID-19 pandemic period, to restore investor and stakeholder
confidence, which is necessary to sustain economic recovery. In the same vein, Liu and Sun
(2022) examined the effect of the COVID-19 pandemic on earnings management and the
value relevance of earnings, in the US context. Contrary to Lassoued and Khanchel (2021),
they found a significant decline in discretionary accruals from 2019 (prepandemic year) to
2020 (pandemic year). The authors argued that US firms tend to manage earnings
downward to take a big bath in reporting earnings in the pandemic year. They, also, showed
that the COVID-19 pandemic had impaired the value relevance of earnings.
JFRA Ultimately, the aforementioned studies provide important insights into the economic
consequences of the COVID-19 pandemic. However, literature on corporate behavior during
this pandemic is scarce and provided mixed results. This study aims to fill this gap in the
literature and tests whether the COVID-19 pandemic has an effect on corporate TA in the US
context.

3.2 Tax avoidance during crises: the effect of the COVID-19 pandemic
The global financial and economic crisis presents major challenges for collecting taxes by
tax administration given the economic recession (Brondolo, 2009). According to Brondolo
(2009), an economic downturn could worsen taxpayer compliance. The author asserted that
“one of the main factors that could cause revenue to decline in relation to Gross Domestic
Product (GDP) is the possibility of changes in taxpayers compliance” (p. 5). In a report
published by the ITEP, Hanauer (2021) testified that many US firms reported losses in 2020
because the pandemic has been hard. But firms that have reported profits, even record
profits, have avoided taxes.
According to the institutional theory, firm’s practices are governed by the institutional
environment within which it operates (Zucker, 1987; Lassoued and Khanchel, 2021).
Therefore, during the economic crisis caused by the COVID-19 pandemic, firms may change
their tax compliance behaviors as a response to the environmental pressure and
performance decline. There could be two scenarios related to tax compliance behavior
during an economic downturn.
On the one hand, based on the benchmark model of Allingham and Sandmo (1972),
Brondolo (2009) argued that a fall in income leads to improved tax compliance given that the
taxpayer’s relative risk aversion is normally assumed to increase with decrease in income.
Brondolo (2009, p 5) stated that “The basic models of income tax compliance suggest
compliance might in some respects improve as incomes fall during a recession, both because
individuals may become less willing to take the risk involved in cheating on their taxes and
as a consequence of progressivity in the tax code. The latter means that a reduction in
income implies a lower marginal tax rate-which leaves a smaller gain from and, hence less
incentive for, not declaring that income.” Accordingly, in a pandemic period which seriously
affected firm’s income and performance (Shen et al., 2020; Hanauer, 2021), we can assume
that the COVID-19 pandemic affects negatively corporate TA.
On the other hand, according to the economic deterrence models which focus on the cost–
benefit framework to explain tax compliance behavior, the taxpayer is a rational economic
agent who assesses the costs and benefits of evading taxes. Indeed, if the expected benefits
(tax rent) outweigh the costs (probability of caution and sanctions), taxpayer will evade
taxes (Walsh, 2012). Therefore, drawing on insights from economic deterrence models, we
can assume that the COVID-19 pandemic affects positively corporate TA. One plausible
explanation to this assumption is that taxpayer who faces an economic crisis characterized
by a significant increase in uncertainty level, will search financial sources to cope with its
serious financial difficulties, for example, credit default risk and bankruptcy. Therefore, he
will engage in TA to increase its tax rent, regardless of the risk of being audited by the tax
authority. According to Brondolo (2009), this behavior could be reinforced by social norms
when the taxpayer becomes aware of the decrease in the tax laws enforcement level, in a
crisis period, as well as he see other people evade taxes making this behavior more socially
acceptable.
Empirical evidence on the impact of economic crisis on taxpayer compliance is scarce. In
the US context, Plumley (1996) provided evidence that taxpayers’ filing and reporting
compliance are negatively related to the unemployment rate. In China context, Cai and Liu
(2009) showed a negative association between corporate TA and the access to credit, Corporate tax
implying that taxpayer tends to evade taxes when it faces tight credit conditions combined avoidance
with an economic crisis. Using a sample of 203 Australian listed firms over the period 2006–
2010, Richardson et al. (2015) showed that financial distress is significantly and positively
associated with corporate TA across several proxies of TA. They, also, provided empirical
evidence that this association was strengthened because of the Global Financial Crisis of
2008. Nguyen and Nguyen (2020) found a positive association between economic policy
uncertainty and corporate TA. They indicated that the US firms use several aggressive
strategies to avoid taxes including long-term tax planning or shelters. By contrast, based on
a sample of Chinese listed firms over the period 2008–2018, Shen et al. (2021) found a
negative association between the economic uncertainty level and TA.
To the best of our knowledge, research on TA during the COVID-19 pandemic is not yet
examined. Based on the aforementioned theoretical arguments and the mixed empirical
findings, we can conclude that the impact of the COVID-19 pandemic on corporate TA
seems reasonable but is not clear ex ante. Thus, we state our hypothesis in the alternative
form, as follows:

H1. Ceteris paribus, the COVID-19 pandemic has an impact on corporate tax avoidance.
Figure 1 summarizes the research conceptual framework.

4. Research design
4.1 Sample selection
To test our hypothesis, we selected nonfinancial firms listed in the S&P 500 index. Using
this index allowed us to incorporate largest publicly listed firms which have been accused
in prior studies to avoid taxes (Rego, 2003; Hanlon and Heitzman, 2010; Joshi, 2020).
We restricted the study context to the USA because it is among the most impacted
worldwide countries by the COVID-19 pandemic. Furthermore, the key advantage to rely on
a single country allows us to understand the institutional setting that generated the evidence
better (Christensen, 2019).
In total, 319 listed firms operating in different sectors were initially identified from the
DATASTREAM database, excluding the financial sector and firms not assigned to any sector.
For these 319 firms, we collected the necessary data to test our predictions spanning the 2019–
2021 period. Year 2019 was used as the prepandemic period when 2020 and 2021 were considered

INSTITUTIONAL THEORY

COVID-19 CORPORATE TAX

PANDEMIC AVOIDANCE
Independent variable Dependent variable

The benchmark model of

Allingham and Sandmo’s
Taxpayer’s relative risk
aversion is assumed to
-
(1972) increase with decrease
Economic crisis in income

Increasing uncertainty
Figure 1.
Performance decline Economic deterrence Taxpayer seeks to
+ Research conceptual
models increase its tax rent to
(cost-benefit framework) cope with crisis framework
JFRA as the pandemic period [1]. We used a narrower time window for testing the research hypothesis
for two main reasons. First, this choice allowed us to isolate the effects of the COVID-19 pandemic
on corporate TA with minimal likelihood of contamination by other confounding events. Second,
we considered only 2019 as a prepandemic period because a “Tax Cuts and Jobs Act” (TCJA) was
signed into law by President Trump on 2017, bringing sweeping changes to the Internal Revenue
code of 1968 [2], which came into effect on January 1, 2018 [3].
The primary sample consists of 957 firm-year observations. We then removed firm-year
observations with negative effective tax rates [4] because they are difficult to interpret
(Richardson and Lanis, 2007). Another set of observations was dropped for which effective tax
rates exceed one, because this can cause model estimation problems (Gupta and Newberry, 1997;
Richardson and Lanis, 2007). Lastly, we excluded observations with missing data from any of
the variables needed.
Table 1, Panel A, illustrates the sample selection process. The final sample comprises a
total of 696 firm-year observations. Panels B and C of Table 1 display, respectively, the
sample split by year and industry.

4.2 Corporate tax avoidance proxies

Hanlon and Heitzman (2010, p. 11) provided a conceptual definition of TA as “the reduction
of explicit taxes.” According to Kirchler et al. (2003), TA refers to reducing taxes by using
legal means which differs from tax evasion which is perceived as illegal.
To measure TA, prior studies used several proxies [5]. To empirically test the research
hypothesis, we used the CUETR, the CAETR and BTD as proxies for corporate TA. These
proxies have been, extensively, used in numerous empirical tax researches (Chen et al., 2012;
Armstrong et al., 2012; Hanlon and Heitzman, 2010; Ayers et al., 2009; Jaafar and Thornton,
2015; Jackson, 2015).
For a specific reporting year, the CUETR was computed as current income tax divided
by book pretax income. For the CAETR, it was calculated as cash income tax paid divided
by book pretax income. Concerning BTD proxy, it presents the difference between book
income and taxable income scaled by total assets.
We supposed that the more the firm engages in tax avoiding activities, the higher is the
BTD level and the lower are the CUETR and CAETR.
By using the CUETR, we could capture TA that creates both permanent and temporary
differences between book income and taxable income, unlike the GAAP ETR [6] (Chen et al.,
2012). Furthermore, the CAETR is expected to reflect the short-term TA behavior that is
paid in cash. It is used because it is affected by tax deferral strategies but is not affected by
changes in the tax accounting accruals (Hanlon and Heitzman, 2010).

4.3 Model specification

To test our hypothesis, we performed a multiple regression model as follows:

TAi;t ¼ b0 þ b1 COVID19i;t þ bn ðCONTROLSÞn;i;t þ «i;t

where TA is one of the three proxies used to measure corporate TA and COVID-19 is a
dichotomous variable coded 1 for 2020–2021 firm-year observations and zero otherwise
(2019 firm-year observations).
The main coefficient of interest in the model is b1 which reflects the effect of the COVID-
19 pandemic on corporate TA. The hypothesis predicts that b1 should be significant.
In addition, we included firm-level characteristics as control variables (CONTROLS). They
include firm size (SIZE), leverage (LEV), profitability (ROA), intensity of intangible (INTANG)
Panel A: Sample selection procedure
Corporate tax
US publicly traded firms listed in the S&P 500 index, excluding firms operating in financial sectors 319 avoidance
or not assigned to any sector
Initial number of firm-year observations 957
Excluding firm-year observations with: (55)
 Negative ETRs and ETRs exceeding 1 (206)
 Missing data for study variables
Final number of firm-year observations 696
Panel B: Distribution of firm-year observations by year
Year Number of obs. (%)
2019 245 35.20
2020 201 28.88
2021 250 35.92
Total 696 100.00
Panel C: Distribution of firm-year observations by industry
Industry type Number of obs. (%)
(ICB classification)
Technology 116 16.67
Telecommunications 7 1.01
Health care 126 18.10
Automobiles and parts 17 2.44
Consumer products and services 51 7.33
Media 15 2.16
Retailers 62 8.91
Travel and Leisure 31 4.45
Food beverage and tobacco 59 8.48
Personal, care, drugs and grocery store 14 2.01
Construction and material 14 2.01
Industrial goods and services 93 13.36
Basic resources 4 0.57 Table 1.
Chemicals 24 3.45 Summary of the
Energy 26 3.74
Utilities 37 5.32
sample selection
Total 696 100.00 procedure and
sample
Note: ICB = Industry classification benchmark characteristics

and tangible assets (PPE) and importance of inventories (INVENT). These control variables
are previously shown in the literature to be related to the level of corporate TA (Richardson
and Lanis, 2007; Markle and Shackelford, 2012; Taylor and Richardson, 2012; Jaafar and
Thornton, 2015; Kobbi-Fakhfakh, 2021).
Finally, to control for the effect of time and industry, we included, respectively, year and
industry fixed effects in our model.
Data collection for all the study variables was derived from DATASTREAM
database. Table 2 provides full definitions of all the variables included in our regression
model.
We estimated our regression model by using STATA software. To achieve robust
estimations, several econometric tests were performed, including tests of specification,
heteroskedasticity and autocorrelation. A “Breusch–Pagan test” for heteroskedasticity and a
“Wooldridge test” for autocorrelation indicate the presence of both heteroskedasticity and
autocorrelation problems for our regression model using BTD as a proxy of TA. A problem
of heteroskedasticity was also identified when we used the other proxies of TA, that is,
JFRA Variables Measures

Dependent variable: Corporate tax avoidance proxies

Current ETR (CUETR) Current income tax/Pretax book income
Cash ETR (CAETR) Cash income tax paid/Pretax book income
BTD (Pretax book income-Current income tax/Statutory tax rate)/Total
assets
TEMPBTD (Deferred income tax/Statutory tax rate)/Total assets
PERMBTD BTD-TEMPBTD
Independent variables
COVID-19 Dummy variable equal to 1 (0 otherwise) for 2020–2021 firm-year
observations
SIZE Natural logarithm of total assets
LEV Total debt/Total assets
ROA Net income/Total assets
INTANG Intangible assets/Total assets
PPE Net property plant and equipment/Total assets
INVENT Inventory/Total assets
SERIOUS SECT Dummy variable equal to 1 (0 otherwise) if the firm operates in a sector
classified among the most-impacted sectors by COVID-19
Table 2. Year Year-fixed effects
Variables definitions Industry Industry-fixed effects

CUETR and CAETR. We therefore estimated our models using “feasible generalized least
square” (FGLS) to obtain robust results.

5. Empirical results and discussion

5.1 Descriptive statistics
All continuous variables were winsorized using the 1st and 99th percentiles of each variable
as limit values to avoid any problem related to the presence of outliers or extreme data.
Table 3 provides the summary descriptive statistics relating to all the study variables.
Table 3 reports that the means (medians) for the CUETR and CAETR are, respectively,
about 0.195 (0.195) and 0.194 (0.189). These values seem to be lower than the US federal tax
rate [7].

Variables Mean SD P25 P50 P75

CUETR 0.195 0.107 0.134 0.195 0.241

CAETR 0.194 0.121 0.127 0.189 0.248
BTD 0.014 0.047 0.013 0.006 0.031
COVID-19 0.648 0.478 0 1 1
SIZE 16.826 1.179 15.963 16.734 17.626
LEV 0.299 0.170 0.189 0.296 0.406
ROA 0.106 0.065 0.057 0.091 0.139
INTANG 0.298 0.228 0.086 0.267 0.483
PPE 0.282 0.226 0.113 0.194 0.431
INVENT 0.087 0.103 0.015 0.061 0.111
Table 3. Notes: This table reports the descriptive statistics for the study variables using 696 firm-year observations
Summary descriptive from 2019 to 2021. All variables are defined in Table 2. All continuous variables were winsorized at the 1st
statistics of variables and 99th percentiles
Table 3 also shows that the mean (median) for BTD is about 0.014 (0.006). In addition, the Corporate tax
BTD score ranges from negative differences (P25 = 0.013) indicating that taxable income avoidance
was slightly higher than book income to positive differences (P75 = 0.031) indicating that
book income was slightly higher than taxable income. The difference between the first and
third quartile values was considerably small, indicating a slight heterogeneity in the
divergences revealed by the firms. The standard deviation (0.047) is relatively low,
indicating that the individual observations are close to the mean.
To test for multicollinearity, Table 4 presents the correlation matrix for all the variables
included in the regression models. The Pearson correlations are in the bottom left and the
Spearman correlations are in the top right. The matrix show that the magnitude and
direction of both parametric and nonparametric coefficients are very similar and are lower
than 0.8, a threshold that was widely accepted in prior literature (Kennedy, 2008; Neter et al.,
1990). We can, therefore, conclude that there is no serious problem of multicollinearity
between our independent variables.
Table 4 shows that there are statistically significant connections between the three
proxies of TA CUETR, CAETR and BTD. There is a positive and significant correlation
between the two effective tax rates measures CUETR and CAETR. Furthermore, a
negative and significant correlation appears between these two proxies and BTD. This
finding confirms the idea that the more the firm engages in tax avoiding activities, the
greater the gap between book income and taxable income and the lower the current and
CAETRs.

5.2 Regression results

Table 5 summarizes the FGLS estimates of our regression models. It shows that the
“Wald Chi2” test of overall significance of each model is significant at the 1% level
(Prob>Chi2 = 0.000), which indicates that our estimated models have significant
explanatory powers.
The research hypothesis tests the impact of the COVID-19 pandemic on corporate TA.
Columns 1–3 report results respectively for CUETR, CAETR and BTD. Table 5, column 1,
reveals a positive and statistically significant coefficient on COVID-19 (ß = 0.015,
z-stat = 4.81, p < 0.01), indicating an increase in CUETR in the postpandemic period. This
finding suggests that the COVID-19 pandemic reduces the firms’ propensity to engage in
TA. One plausible interpretation to this finding is that the US publicly listed firms have
experienced a serious drop in their income postpandemic period, following the markets
closure and the quarantine periods that hampered business. Therefore, with lower profits,
they have not motives to evade taxes which corroborates Brondolo’s (2009) argument and
supports the Allingham and Sandmo’s (1972) benchmark model according to which a
decrease in income leads to reduced TA given that the taxpayer’s relative risk aversion is
assumed to increase with income decrease. Furthermore, the significant effect of the
COVID-19 pandemic on corporate TA confirms the institutional theory predictions
according to which the institutional environment within which the firm operates affects its
behavior (Zucker, 1987; Lassoued and Khanchel, 2021). Indeed, the economic crisis caused
by the pandemic including increasing uncertainty and decreased performance is likely to
shape corporate practices particularly with respect to TA practices.
In contrast, Table 5, column 2, shows that the coefficient on COVID-19 is insignificant
(ß = 0.005, z-stat = 1.28), indicating that the CAETR was not affected by the COVID-19
pandemic. This finding could suggest that the CAETR was not appropriate to reflect TA
during a pandemic crisis. Hanlon and Heitzman (2010) argued that the cash ETR could
mismatch the numerator and denominator. Indeed, the cash taxes paid could include taxes
 JFRA

Table 4.
Correlation matrix
1 2 3 4 5 6 7 8 9 10

1. CUETR 1 0.728*** 0.929*** 0.043 0.019 0.046 0.153*** 0.233*** 0.195*** 0.120***
2. CAETR 0.745*** 1 0.681*** 0.012*** 0.007 0.073* 0.145*** 0.287*** 0.239*** 0.105***
3. BTD 0.728*** 0.569*** 1 0.057 0.036 0.118*** 0.265*** 0.194*** 0.093** 0.090**
4. COVID-19 0.033 0.017 0.051 1 0.041 0.006 0.024 0.015 0.033 0.024
5. SIZE 0.019 0.044 0.085** 0.043 1 0.210*** 0.280*** 0.017 0.164*** 0.168***
6. LEV 0.051 0.071* 0.203*** 0.004 0.193*** 1 0.114*** 0.144*** 0.103*** 0.049
7. ROA 0.202*** 0.203*** 0.434*** 0.028 0.259*** 0.130*** 1 0.209*** 0.125*** 0.174***
8. INTANG 0.246*** 0.267*** 0.202*** 0.014 0.001 0.123** 0.245*** 1 0.574*** 0.124***
9. PPE 0.225*** 0.235*** 0.017 0.046 0.202*** 0.111*** 0.159*** 0.594*** 1 0.005
10. INVENT 0.067* 0.044 0.078** 0.001 0.150*** 0.061 0.174*** 0.256*** 0.117*** 1

Notes: This table reports the correlation matrix using 696 firm-year observations from 2019 to 2021. All variables are defined in Table 2. All continuous
variables were winsorized at the 1st and 99th percentiles. The bottom left half of the table contains Pearson’s parametric correlation coefficients, whereas the
upper right half of the table shows Spearman’s nonparametric correlation coefficients. ***, ** and * denote significance at the 1, 5 and 10% levels, respectively
Variables CUETR CAETR BTD
Corporate tax
avoidance
COVID-19 0.015 (4.81)*** 0.005 (1.28) 0.009 (6.56)***
SIZE 0.002 (1.59) 0.006 (3.58)*** 0.001 (2.64)***
LEV 0.054 (5.44)*** 0.067 (5.63)*** 0.047 (10.72)***
ROA 0.378 (14.12)*** 0.351 (9.73)*** 0.289 (16.96)***
INTANG 0.027 (2.43)** 0.021 (1.52) 0.025 (5.05)***
PPE 0.095 (8.71)*** 0.121 (10.36)*** 0.010 (1.94)*
INVENT 0.021 (1.03) 0.016 (0.76) 0.022 (1.74)*
Intercept 0.084 (3.48)*** 0.011 (0.36) 0.007 (0.67)
Year FE Yes Yes Yes
Industry FE Yes Yes Yes
Wald Chi2 5,812.87 2,742.33 1,562.49
Prob>Chi2 0.0000 0.0000 0.0000
Adjusted R2 (%) 20.57 17.55 30.50
Observations 696 696 696

Notes: This table reports the baseline results of regression models FGLS estimation. The dependent
variable is one of the three TA proxies, including CUETR, CAETR and BTD. The sample selection process Table 5.
is described in Table 1 and all variables are defined in Table 2. All continuous variables were winsorized at
the 1st and 99th percentiles. Coefficient estimates are presented with the z-statistics reported in parentheses. Baseline results of
All models include year and industry fixed effects. ***, ** and * denote significance at the 1, 5 and 10% regression models
levels, respectively estimation

not related only to the current period (In case of tax audit completed in the current period),
while the denominator reflects current pretax income.
The third proxy of TA, used in this study, is BTD. Table 1, column 3, reports a negative
and statistically significant coefficient on COVID-19 (ß = 0.009, z-stat = 6.56, p < 0.01),
indicating a decrease in BTD in the postpandemic period. This finding suggests that the
COVID-19 pandemic reduces the gap between book income and taxable income highlighting
a decline in corporate TA practices during the health crisis period.
Taken together, the research findings suggest that the economic concerns caused by
the pandemic, including income drops, outweigh the propensity of US firms’ managers to
evade taxes. The significant positive impact of the ROA variable on TA for the three TA
proxies in Table 3 could support this view and indicate that less profitable firms might
have less incentives for tax planning (Richardson and Lanis, 2007; Armstrong et al.,
2012).
Table 5, also, shows that the coefficients on the other control variables included in our
model are statistically significant but the direction and significance level of them depend
on the TA proxy used. In particular, we found a positive and significant effect of the firm
size on BTD indicating that although large firms are more visible and face greater
political costs (Zimmerman, 1983), they have sufficient resources to engage in TA
strategies and influence the policy process (Rego, 2003; Wilson, 2009). Furthermore,
Table 5 reveals that the CUETR (BTD) is significantly and positively (negatively)
associated with leverage (LEV) and intangible assets intensity (INTANG) but negatively
(positively) related to PPE intensity (PPE). These findings support the view that the
CUETR and the BTD vary inversely in explaining TA. They indicate that more leveraged
firms and firms with high (low) investments in intangible (tangible) assets are more likely
to pay more taxes. Overall, these findings are consistent with general expectations from
prior literature (Richardson and Lanis, 2007; Hanlon and Heitzman, 2010; Jaafar and
Thornton, 2015; Kobbi-Fakhfakh, 2021).
JFRA 6. Additional tests
6.1 Testing the impact of the COVID-19 pandemic on temporary and permanent
components of book-tax differences
The BTD not only provide information on the extent of the mechanical difference between
accounting and tax rules but also on management strategies related to earnings
management and tax management (Tang and Firth, 2011; Hanlon, 2005).
Prior studies on BTD focused on either temporary BTD (Hanlon, 2005; Blaylock et al.,
2012) or permanent BTD (Frank et al., 2009) or both because earnings management and tax
management can create both permanent and temporary BTD (Wilson, 2009; Tang and Firth,
2011; Moore, 2012; Jackson, 2015). On the one hand, temporary BTD arise when financial
accounting and tax accounting record economic events in different time periods (Jackson,
2015). In empirical studies, this BTD component was computed, for a specific reporting year,
as deferred income tax divided by statutory tax rate scaled by total assets. According to
Jackson (2015), temporary BTD change the balance between current and deferred tax
expenses, but do not change the total firm’s tax expenses. On the other hand, permanent
BTD are transactions recognized for financial or tax purposes, but not both. In empirical
studies, the permanent BTD was obtained, for a specific reporting year, by subtracting
temporary BTD from the total BTD.
As an additional test, we divided the total BTD into two components such as permanent
(PERMBTD) and temporary (TEMPBTD) to examine which component of BTD drives more
our baseline results. Therefore, we reran our model twice using TEMPBTD and PERMBTD
as dependent variables. Table 6, columns 1 and 2, report the results of regression model
estimation for TEMPBTD and PERMBTD, respectively.
Table 6, column 1, shows a negative and statistically significant coefficient on COVID-19
(ß = 0.005, z-stat = 4.69, p < 0.01), indicating a decrease in TEMPBTD in the
postpandemic period. However, the coefficient is insignificant for PERMBTD (Table 6,
column 2). These findings suggest that the firm’s propensity to engage in TA reduces
during the pandemic period by reducing deferred tax expenses, whereas there is no impact
of the COVID-19 on permanent BTD (PERMBTD). The absence of an effect on PERMBTD
could be explained by the fact that during the study period this BTD component did not
experience regulatory upheavals both in accounting and taxation.

6.2 Testing the impact of the COVID-19 pandemic on corporate tax avoidance across
industries
The COVID-19 has had a significant impact on the global economy. However, the effects of
this pandemic have varied across sectors (European Commission, 2021; Shen et al., 2020).
According to Narayan and Sharma (2011), sectors are heterogenous, and therefore they are
likely to react to market shocks differently. Shen et al. (2020) found a negative impact of the
COVID-19 on firm performance and showed that this impact is more pronounced in serious-
impact industries.
Our primary analysis provides evidence that the COVID-19 pandemic reduces corporate
TA. Following Shen et al. (2020), we divided the sample into high- and low-affected groups
by industry dimension. To do this, we searched which sectors are hard hit by the outbreak
in the USA. A paper written and published by S&P Global Market Intelligence, on February
2022, assessed the impact of the COVID-19 pandemic on industries from a probability of
default perspective. It stressed that the five industries most affected by COVID-19 over the
period January 2, 2020 to January 15, 2022, include airlines; automobiles; energy equipment
and services; hotels, restaurants and leisure; and specialty retail.
 The effect of the COVID-19 pandemic on corporate tax avoidance across
BTD components industries
Variables TEMPBTD (1) PERMBTD (2) CUETR (3) CAETR (4) BTD (5)

COVID19*SERIOUS-SECT – – 0.002 (0.25) 0.013 (1.78)* 0.005 (1.09)

COVID-19 0.005 (4.69)*** 0.001 (0.71) 0.015 (4.56)*** 0.007 (1.71)* 0.009 (5.92)***
SERIOUS-SECT – – 0.124 (11.87)*** 0.149 (13.75)*** 0.042 (4.21)***
CONTROLS Yes Yes Yes Yes Yes
Constant 0.067 (2.05)** 0.031 (2.36)** 0.084 (3.48)*** 0.010 (0.33) 0.007 (0.67)
Year FE Yes Yes Yes Yes Yes
Industry FE Yes Yes Yes Yes Yes
Wald Chi2 Prob>Chi2 662.02 0.0000 1,132.57 0.0000 6,130.24 0.0000 1,846.39 0.0000 1,566.96 0.0000
Adjusted R2 (%) 12.62 696 35.55 696 20.45 696 17.46 696 30.41 696
Observations

Notes: This table reports the results of additional tests. Columns 1 and 2 report the results of regression models’ FGLS estimation using BTD component, that is,
TEMPBTD and PERMBTD. Columns 3–5 report results of the effect of the COVID-19 pandemic on corporate tax avoidance across industries. The sample
selection process is described in Table 1 and all variables are defined in Table 2. All continuous variables were winsorized at the 1st and 99th percentiles.
Coefficient estimates are presented with the z-statistics reported in parentheses. All models include year fixed effects. ***, ** and * denote significant at the 1, 5
and 10% levels, respectively

Results of additional
avoidance

tests
Table 6.
Corporate tax
JFRA We then used a differences-in-differences (DID) model to quantify the impact of the
COVID-19 pandemic on corporate TA across industries. This model is as follows:

TAi;t ¼ b0 þ b1 COVID19*SERIOUSSECTi;t þ b2 COVID19i;t þ b3 SERIOUSSECTi;t

þ bn ð CONTROLSÞn;i;t þ «i;t

where SERIOUS-SECT is a dichotomous variable which takes 1 (0 otherwise) if the firm in

our sample operates in a sector classified among the most-impacted sectors by COVID-19.
The main coefficient of interest in the model is b1. A significant coefficient b1 suggests
that the impact of COVID-19 on TA differs across industries.
The DID estimates of the impact of COVID-19 on corporate TA are shown in Table 6,
columns 3–5, by using, respectively, CUETR, CAETR and BTD as proxies of TA. Table 6
shows the COVID-19 pandemic has the same impact on corporate TA, regardless of the
degree of industry failure probability for CUETR and BTD. Indeed, the regression
coefficient of the core variable COVID-19*SERIOUS-SECT in insignificant. Nevertheless,
we should note that this coefficient is negative and slightly significant at the 10% level
(ß = 0.013, z-stat = 1.78, p < 0.10) when we used CAETR as a TA proxy which indicates
that firms in serious-impact industries have lower CAETR than those in other industries,
following the pandemic.

7. Conclusion
This study empirically tested the effect of the COVID-19 pandemic on corporate TA for a
sample of US listed firms, over the period 2019–2021. Corporate TA was measured by three
proxies: the CUETR, the CAETR and BTD.
Findings show that the COVID-19 affected positively the CUETRs, but negatively BTD.
They suggest that the US firms engage less in TA in the postpandemic period. By carrying
out additional tests, we provide evidence that this effect is the same, regardless of the degree
of industry failure probability, but it is more driven by the reduction of deferred tax
expenses (temporary BTD component). Our findings are robust to controlling for firm-level
characteristics previously shown in the literature to be related to the level of corporate TA,
as well as for year and industry fixed effects.
Overall, the evidence corroborates the institutional theory predictions assuming that
environment pressure affects corporate practices (Zucker, 1987; Lassoued and Khanchel,
2021), in our context corporate TA during a pandemic period. It, also, suggests that the US
publicly listed firms have experienced a serious drop in their income postpandemic period.
Therefore, with lower profits, they are not willing to evade taxes which corroborates
Brondolo’s (2009) argument and supports the Allingham and Sandmo’s (1972) benchmark
model according to which a fall in income leads to improved tax compliance.
This paper enriches taxation research during economic crises. The research findings
have important policy implications. On the one hand, the fiscal policy should stimulate
growth to allow firms to tackle the challenges they confronted post-COVID-19. On the other
hand, the global economic crisis caused by the pandemic has led to a major deterioration in
public finances and has raised inequalities across households. Therefore, countries should
review their public fiscal policies to achieve a balance of equity, growth and sustainability.
They should pay more attention to the distribution of income and wealth between the poor
and rich. They should, also, give more support to low-income households and provide
assistance to businesses. Enacting wealth taxes on the higher earners and wealthiest
households could be a solution. In this context, tax reform focusing on tax progressivity
could counter in part the negative economic effects of the COVID-19 pandemic and led to Corporate tax
economy recovery. avoidance
The findings of this study should be interpreted with three main caveats in mind. First,
the decrease of the CUETRs and the increase in the BTD of US publicly listed firms, during
2020–2021 period, could be caused by events other than the health COVID-19 crisis. Indeed,
the TCJA which took effect on January 1, 2018, just before the beginning of the COVID-19
pandemic, could have repercussions on corporate TA during the study period. Second, tax
incentives granted by the US government during the pandemic such as the delay in tax
deadlines may have an effect on TA post-COVID-19. Third, our study was carried out on a
specific setting, that is, the USA, which limits the generalizability of the study results.
Future research may be conducted to examine the impact of COVID-19 on TA in other
contexts.

Notes
1. The first confirmed case of COVID-19 infection in the USA was reported on January 2020. www.nejm.
org/doi/full/10.1056/NEJMc2004794?query=recirc_curatedRelated_article (accessed 26/05/2022).
2. One of the major elements of the changes brought by the TCJA is the reduction of tax rates for
businesses and individuals. For more detail on how did the TCJA changes business taxes, see
www.taxpolicycenter.org/briefing-book/how-did-tax-cuts-and-jobs-act-change-business-taxes
3. We acknowledge that the TCJA may have an impact on corporate tax avoidance during the
study period 2019–2021. However, we presume that the COVID-19 pandemic is the major event
during the study period. Furthermore, a report published by Gardner and Wamhoff (2021)
provided statistics that firms did not stop evading taxes post-TCJA and concluded that this tax
reform does not work properly.
4. Effective tax rates are used in this study as proxies for coporate tax avoidance (For more detail,
see para 4.2).
5. See Table 1 of Hanlon and Heitzman (2010, p. 140) for alternatives proxies of tax avoidance used
in tax literature.
6. The GAAP ETR is also referred to as the book effective tax rate and is calculated as the ratio of
total tax expense divided by pre-tax book income.
7. The TCJA reduced the corporate tax rate from 35% to 21% (www.taxpolicycenter.org/briefing-
book/how-did-tax-cuts-and-jobs-act-change-business-taxes, accessed 26/05/2022).

References
Achim, M.V., Safta, I.L., Vaidean, V.L., Mures, an, G.M. and Borlea, N.S. (2021), “The impact of
COVID-19 on financial management: evidence from Romania”, Economic Research-Ekonomska
Istraživanja, Vol. 35 No. 1, pp. 1-26.
Allingham, M.G. and Sandmo, A. (1972), “Income tax evasion: a theoretical analysis”, Journal of Public
Economics, Vol. 1 Nos 3/4, pp. 323-338.
Armstrong, C.S., Blouin, J. and Larcker, D. (2012), “The incentives for tax planning”, Journal of
Accounting and Economics, Vol. 53 Nos 1/2, pp. 391-411.
Ayers, B., Jiang, J. and Laplante, S.K. (2009), “Taxable income as a performance measure: the effects of
tax planning and earnings quality”, Contemporary Accounting Research, Vol. 26 No. 1, pp. 15-54.
Barai, M.K. and Dhar, S. (2021), “COVID-19 pandemic: inflicted costs and some emerging global issues”,
Global Business Review, pp. 1-20, doi: 10.1177/0972150921991499.
JFRA Blaylock, B., Shevlin, T. and Wilson, R. (2012), “Tax avoidance, large positive book-tax-differences, and
earnings persistence”, The Accounting Review, Vol. 87 No. 1, pp. 91-120.
Brondolo, J. (2009), “Collecting taxes during an economic crisis: challenges and policy options”,
International Monetary Fund (IMF) Staff position note, July 14, SPN/09/17, pp. 1-36.
Cai, H. and Liu, Q. (2009), “Competition and corporate tax avoidance: evidence from Chinese industrial
firms”, The Economic Journal, Vol. 119 No. 537, pp. 764-795.
Chen, L.H., Dhaliwal, D.S. and Trombley, M.A. (2012), “Consistency of book-tax differences and the
information content of earnings”, Journal of the American Taxation Association, Vol. 34 No. 2,
pp. 93-116.
Christensen, H.B. (2019), “Broad-versus narrow-sample evidence in disclosure regulation studies: a
discussion of Badia, Duro, Jorgensen, and Ormazabal”, Contemporary Accounting Research,
Vol. 37 No. 3, pp. 1720-1755.
Crucean, A.C. and Hategan, C.D. (2021), “Effects of the COVID-19 pandemic estimated in the financial
statements and the auditor’s report”, Audit Financiar, Vol. 19 No. 161, pp. 105-118.
Economic Commission for Latin America and the Caribbean (ECLAC) (2020), “Impact of COVID-19 on
the United States economy and the policy response”, United Nations, pp. 1-30, available at: www.
cepal.org/en/publications/45984-impact-covid-19-united-states-economy-and-policy-response
Elmarzouky, M., Albitar, K. and Hussainey, K. (2021b), “COVID-19 and performance disclosure: does
governance matter?”, International Journal of Accounting and Information Management, Vol. 29
No. 5, pp. 776-792, doi: 10.1108/IJAIM-04-2021-0086.
Elmarzouky, M., Albitar, K., Karim, A.E. and Moussa, A.S. (2021a), “COVID-19 disclosure: a novel
measurement and annual report uncertainty”, Journal of Risk and Financial Management,
Vol. 14 No. 12, pp. 1-12.
European Commission (2021), “The sectoral impact of the COVID-19 crisis”, Technical note for the Eurogroup,
march 2021, available at: www.consilium.europa.eu/media/48767/eg-note-sectoral-impact_fin.pdf
Frank, M.M., Lynch, L.J. and Rego, S.O. (2009), “Tax reporting aggressiveness and its relation to
aggressive financial reporting”, The Accounting Review, Vol. 84 No. 2, pp. 467-496.
Gardner, M. and Wamhoff, S. (2021), “Corporate tax avoidance under the Tax Cuts and Jobs Act”,
Institute of Taxation and Economic Policy (ITEP) Report, July 2021, available at: https://itep.org/
corporate-tax-avoidance-under-the-tax-cuts-and-jobs-act/
Gupta, S. and Newberry, K. (1997), “Determinants of the variability on corporate effective tax rates:
evidence from longitudinal data”, Journal of Accounting and Public Policy, Vol. 16 No. 1, pp. 1-34.
Hanauer, A. (2021), “Corporate tax reform in the wake of the pandemic”, Institute on taxation and
economic policy (ITEP) Report, April, available at: https://itep.sfo2.digitaloceanspaces.com/
040221-Corporate-Tax-Reform-in-the-Wake-of-the-Pandemic.pdf
Hanlon, M. (2005), “The persistence and pricing of earnings, accruals and cash flows when firms have
large book-tax differences”, The Accounting Review, Vol. 80 No. 1, pp. 137-166.
Hanlon, M. and Heitzman, S. (2010), “A review of tax research”, Journal of Accounting and Economics,
Vol. 50 Nos 2/3, pp. 127-178.
Haroon, O. and Rizvi, S.A.R. (2020), “COVID-19: media coverage and financial markets behavior-a
sectoral inquiry”, Journal of Behavioral and Experimental Finance, Vol. 27, p. 100343.
He, P., Sun, Y., Zhang, Y. and Li, T. (2020), “COVID-19’s impact on stock prices across different sectors-
an event study based on the Chinese stock market”, Emerging Markets Finance and Trade,
Vol. 56 No. 10, pp. 2198-2212.
Jaafar, A. and Thornton, J. (2015), “Tax havens and effective tax rates: an analysis of private versus
public European firms”, The International Journal of Accounting, Vol. 50 No. 4, pp. 435-457.
Jackson, M. (2015), “Book-tax differences and future earnings changes”, Journal of the American
Taxation Association, Vol. 37 No. 2, pp. 49-73.
Jebran, K. and Chen, S. (2022), “Corporate policies and outcomes during the COVID-19 crisis: does Corporate tax
managerial ability matter?”, Pacific-Basin Finance Journal, Vol. 73 No. 101743, pp. 1-21.
avoidance
Joshi, P. (2020), “Does private country-by-country reporting deter tax avoidance and income
shifting? Evidence from BEPS Action Item 13”, Journal of Accounting Research, Vol. 58 No. 2,
pp. 333-381.
Kennedy, P. (2008), A Guide to Econometrics, 6th Edition, Wiley-Blackwell, p. 608, available at: www.
wiley.com/en-us/A+Guide+to+Econometrics%2C+6th+Edition-p-9781405182577
Kobbi-Fakhfakh, S. (2021), “The interplay between tax havens, geographic disclosures and corporate
tax avoidance: evidence from European Union”, Accounting, Economics, and Law: A Convivium,
Vol. 2, pp. 1-39.
Laffitte, S., Martin, J., Parenti, M., Souillard, B. and Toubal, F. (2020), “International corporate taxation
after COVID-19: minimum taxation as the New Normal”, CEPII-Policy Brief, Vol. 30, pp. 1-6.
Lassoued, N. and Khanchel, I. (2021), “Impact of COVID-19 pandemic on earnings management: an
evidence from financial reporting in European firms”, Global Business Review, pp. 1-25, doi:
10.1177/09721509211053491.
Liu, G. and Sun, J. (2022), “The impact of COVID-19 pandemic on earnings management and the value
relevance of earnings: US evidence”, Managerial Auditing Journal, Vol. 37 No. 7, pp. 850-868.
Markle, K. and Shackelford, D.A. (2012), “Cross-country comparisons of the effects of leverage,
intangible assets and tax havens on corporate income taxes”, Tax Law Review, Vol. 65 No. 3,
pp. 415-432.
Moore, J.A. (2012), “Empirical evidence on the impact of external monitoring on book-tax difference”,
Advances in Accounting, Vol. 28 No. 2, pp. 254-269.
Narayan, P. and Sharma, S. (2011), “New evidence on oil price and firm returns”, Journal of Banking and
Finance, Vol. 35 No. 12, pp. 3253-3262.
Neter, J., Wasserman, W. and Kutner, M.H. (1990), Applied Statistical Models, Richard D. Irwin, Burr
Ridge, IL.
Nguyen, M. and Nguyen, J.H. (2020), “Economic policy uncertainty and firm tax avoidance”, Accounting
and Finance, Vol. 60 No. 4, pp. 3935-3978.
Ozili, P.K. and Arun, T. (2023), “Spillover of COVID-19: impact on the global economy”, Managing
Inflation and Supply Chain Disruptions in the Global Econom, IGI Global, pp. 41-61.
Padhan, R. and Prabheesh, K.P. (2021), “The economics of COVID-19 pandemic: a survey”, Economic
Analysis and Policy, Vol. 70 No. C, pp. 220-237.
Plumley, A.H. (1996), “The determinants of individual income tax compliance: estimating the impacts
of tax policy, enforcement, and IRS responsiveness”, Internal Revenue Service (IRS) Research
Division, Department of the Treasury IRS (Rev. 11-96), Catalog Number 22555A, available at:
www.irs.gov/pub/irs-soi/pub1916b.pdf
Rego, S.O. (2003), “Tax avoidance activities of US multinational corporations”, Contemporary
Accounting Research, Vol. 20 No. 4, pp. 805-833.
Richardson, G. and Lanis, R. (2007), “Determinants of the variability in corporate effective tax rates and
tax reform: evidence from Australia”, Journal of Accounting and Public Policy, Vol. 26 No. 6,
pp. 689-704.
Richardson, G., Taylor, G. and Lanis, R. (2015), “The impact of financial distress on corporate tax
avoidance spanning the global financial crisis: evidence from Australia”, Economic Modelling,
Vol. 44 No. C, pp. 44-53.
Shen, H., Fu, M., Pan, H., Yu, Z. and Chen, Y. (2020), “The impact of the COVID 19 on firm
performance”, Emerging Markets Finance and Trade, Vol. 56 No. 10, pp. 2213-2230.
Shen, H., Hou, F., Peng, M., Xiong, H. and Zuo, H. (2021), “Economic policy uncertainty and corporate
tax avoidance: evidence from China”, Pacific-Basin Finance Journal, Vol. 65, pp. 1-14.
JFRA Tang, T. and Firth, M. (2011), “Can book-tax differences capture earnings management and tax
management? Empirical evidence from China”, The International Journal of Accounting, Vol. 46
No. 2, pp. 175-204.
Taylor, G. and Richardson, G. (2012), “International corporate tax avoidance practices: evidence from
Australian firms”, The International Journal of Accounting, Vol. 47 No. 4, pp. 469-496.
Walsh, K. (2012), “Understanding taxpayer behaviour-new opportunities for tax administration”, The
Economic and Social Review, Vol. 43 No. 3, pp. 451-475.
Wilson, R. (2009), “An examination of corporate tax shelter participants”, The Accounting Review,
Vol. 84 No. 3, pp. 969-1000.
Zimmerman, J.L. (1983), “Taxes and firm size”, Journal of Accounting and Economics, Vol. 5 No. 1,
pp. 119-149.
Zucker, L.G. (1987), “Institutional theories of organization”, Annual Review of Sociology, Vol. 13 No. 1,
pp. 443-464.

Further reading
Standard & Poor Global Market Intelligence (2022), “Industries most and least impacted by COVID-19
from a probability of default perspective-January 2022 update”, available at: www.spglobal.com/
marketintelligence/en/news-insights/blog/industries-most-and-least-impacted-by-covid-19-from-
a-probability-of-default-perspective-january-2022-update

Corresponding author
Sameh Kobbi-Fakhfakh can be contacted at: kobbisameh@yahoo.fr

For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: permissions@emeraldinsight.com