Family Firms and Tax Aggressiveness in Brazil

  •  Antonio Martinez    
  •  Giliard Ramalho    


This article investigates whether family firms are more aggressive in terms of tax planning than non-family firms
in Brazil, based on a sample of firms listed on the BMF&Bovespa from 2001 to 2012. Chen, Chen, Cheng, &
Shevlin (2010) define tax aggressiveness as management to reduce taxable income through tax planning
activities. Of the sample of companies, 23% are considered to be family firms. We found a significant
relationship between classification as a family firm and tax aggressiveness, based on two metrics. The first,
effective tax rate (ETR), captures the actual taxes paid in relation to pre-tax earnings, while the second, book-tax
differences (BTD), reflects the differences between accounting income and taxable income. The family firms in
the sample were more tax aggressive than the non-family firms. For the variable BTD, family firms presented a
positive sign, indicating a tendency for higher BTD. In turn, ETR had a negative sign, identifying a tendency for
family firms to pay lower taxes.

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