The Tax Authority as Social Media Influencer

• In Event: Tax Evasion, Corporate Behavior, and Norms

Abstract

We study the impact of tax authorities’ social media use on corporate tax behavior in China. Starting in 2010, many local governments began using the popular social media platform Weibo (China’s equivalent to Twitter), posting content designed to educate taxpayers about available tax benefits as well as deter aggressive tax avoidance. Employing administrative data for a large sample of public and private firms, we find that tax authorities’ adoption of Weibo led to diverging effects for small and large firms, with small firms exhibiting a decline in effective tax rates suggesting higher take-up of tax incentives (i.e., an education effect) and large firms exhibiting higher effective tax rates consistent with enhanced deterrence of aggressive tax planning (i.e., a deterrence effect). Both effects are more pronounced when tax authorities’ tweets receive more user engagement and employ multimedia content (pictures and video). Our findings highlight the usefulness of social media as a tool for the government to communicate with the public and inform policy discussions on imperfect take-up rates of tax incentives.

Author

• Benjamin Yost, yostb@bc.edu