Incentives and Opportunities for Tax Planning and Tax Avoidance: Evidence From Iranian Manufacturing Companies

Document Type : Original Article

Authors

1 Master, Department of Accounting, Ayandegan Institute of Higher Education, Tonekabon, Iran.

2 Associate Professor, Department of Accounting, Ayandegan Institute of Higher Education, Tonekaboon, Iran.

Abstract

This study investigates the effect of tax planning incentives and opportunities on tax avoidance. Multivariate linear regression was used to test the hypothesis. The statistical population was 79 manufacturing companies listed on the Tehran Stock Exchange during 2012-2023 (948 company-year observations). Two indices of Kaplan and Zingale's financial constraint and Altman's bankruptcy were used to calculate tax planning incentives. Two indicators are used to measure tax planning incentives: the KZ index as a proxy for financial constraints, which reflects liquidity pressures and limited access to financing sources, and the Altman Z score, which measures the probability of firms going bankrupt. The findings show a positive and significant relationship between tax planning opportunities and tax avoidance, meaning that companies with more opportunities for tax planning tend to be more inclined towards tax avoidance. Also, a positive and significant relationship was observed between tax planning incentives (in both indices) and tax avoidance, which indicates that managers' incentives for tax planning can increase the level of tax avoidance. In addition, the interactive effect of incentives and tax planning opportunities has a significant positive relationship with tax avoidance in these conditions. Also, additional testing of this study's results showed that institutional ownership has a negative effect on tax avoidance and moderates the relationship between tax planning opportunities and tax avoidance. These results can help macro-tax policymakers better understand the impact of different variables on tax avoidance behavior and make better decisions in this area.

Keywords

References

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Budget and Finance Strategic Research
Volume 6, Issue 3 - Serial Number 23
Autumn Quarterly
September 2025
Pages 161-193

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History

  • Receive Date: 23 March 2025
  • Revise Date: 10 July 2025
  • Accept Date: 27 September 2025

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