Social Capital Effect on Private SMEs Tax Avoidance

Abstract

This paper presents the first study of the social capital effect on Norwegian private SMEs' tax avoidance behavior and finds that social capital has an impact. Trust is the social capital with the most impact. To identify the social capital effect, I use a data set with all Norwegian private companies from 2000 to 2017. This study utilizes several different measures of tax avoidance, namely GAAP ETR, CASH ETR, and Long-Run CASH ETR as there is no universally accepted definition for tax avoidance. I find results that firms in municipalities which scores high in positive social capital are less prone to be involved with tax avoidance. My findings are consistent using a variety of robustness checks. The presented results are in line with previous research conducted in other countries.