Abstract

This study empirically analyzed the effect of companies belonging to a chaebol on the tax avoidance of a government agency when a senior official with career in the National Tax Service has been appointed as an outside director. Based on the large－scale business group data presented in the Fair Trade Commission’s corporate group portal, the company’s wedge was calculated and used as a variable. According to the analysis results of this study, the external directors of the National Tax Service, who were elected to a large group of companies with a degree of wedge, had no significant effect on the company’s tax avoidance. This was also true in the results of analyzing the wedge as components. For this reason, it is believed that the cause of the board’s characteristics is attributed to it. The board of directors, which is the company’s top decision－making body, discloses the details of the meeting, so it does not cover practical and detailed strategic aspects. In addition, if tax evasion is found through tax investigations and receives attention from taxation agencies, the cost to the company is also considerable. Because outside directors from high－ranking tax offices value their political and social networks and their reputation, they will not be willing directly to engage in tax evasion, which is quantified and disclosed in financial statements, to endure these risks. Through this study, it is expected that outside directors from the National Tax Service will supplement their roles, and they do not play a leading role in realistic tax evasion of the company.

Keywords

• Tax Avoidance
• Wedge
• Cash－Flow Rights
• Voting Rights
• Outside Directors from National Tax Service

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