Employee views of corporate tax aggressiveness in China: The effects of guanxi and audit independence

This study examines the effects of guanxi and audit independence on the corporate tax aggressiveness of Chinese firms. Based on a survey completed by 174 respondents in 2013, we find that two types of guanxi: favour-seeking guanxi and rentseeking guanxi are significantly associated with ethical judgments of corporate tax aggressiveness. Perceptions of audit independence in-fact are significantly negatively associated with these ethical judgments, whereas audit independence inappearance is positively associated with them. Further, significantly positive associations exist between perceptions that taxaggressive activities are good for the firm and its shareholders and favour-seeking guanxi and between these perceptions and stronger client-auditor relations. This study provides insights into the association between types of guanxi and the propensity of firm management to engage in corporate tax aggressiveness.