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<p style="text-align:justify;">In Brazil, there are no mechanisms to identify&nbsp;cases where controlling shareholders might be using tax aggressiveness as a&nbsp;strategy to expropriate value from minority shareholders, the practice known as&nbsp;tunneling. This deserves attention because investors should be able to&nbsp;understand when tax aggressiveness is not designed to generate the purported&nbsp;value. Hence, this study analyzes the relation between tax aggressiveness and&nbsp;tunneling in companies listed on the Brazilian securities exchange (B3), in the&nbsp;period from 2010 to 2017. The data were obtained from the Economática® database&nbsp;and were submitted to analysis by ordinary least squares in two stages. The&nbsp;results show that tax aggressiveness, measured by the differential effective&nbsp;tax rate (DETR), is statistically significant to explain tunneling since the&nbsp;coefficient of aggressiveness is significant and positive at 5%. Therefore, on&nbsp;average firms in the sample considered to be more aggressive (based on DETR)&nbsp;presented greater tunneling. The coefficient of the variable DETR allowed&nbsp;inferring that a 1% increase in tax aggressiveness is associated with an&nbsp;increase of 0.46% in the proportion of accounts receivable from related parties&nbsp;concerning assets. Thus, tax aggressiveness can reduce the probability of&nbsp;generating value for minority shareholders. This result agrees with the finding&nbsp;of Chan, Mo and Tang (2016), who identified direct evidence of the existence of tax aggressiveness related to&nbsp;tunneling.</p>

mbrq.2020.15.05.pdf

Original Research 

mbrq.2020.15.05.xml

Tunneling and Tax Aggressiveness