Corporate Tax Avoidance from the Perspective of Agency Theory and Multi-Task Incentives

Abstract

Tax avoidance reflects more than a firm’s reaction to tax rules. It is a choice made by managers who weigh competing pressures while their own interests often stray from those of shareholders. This article starts from two premises. First, when ownership is separate from control, the complexity of tax planning lets managers hide rent extraction behind apparent tax reduction. Second, tax decisions occur in a multi-dimensional setting. Managers divide effort across profitability, compliance, ESG metrics, and political costs. A stronger push on one dimension predictably alters behavior on others. The article traces the agency-cost logic of tax avoidance, the trade-offs that surface when multiple tasks compete for managerial attention, and the ways institutional conditions shape both.