European Journal of Studies in Management and Business

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