Social and financial efficiency - a fundamental conflict: How does state ownership affect tax avoidance? Evidence from Sweden

Sammanfattning: Most shareholders view taxes as a cost, but in state-owned enterprises (SOEs), taxes are a direct payment to the owner, the state. This paper examines the association between state ownership and tax avoidance behavior in Sweden. To investigate this, a year- and industry-fixed effects regression model was used to study an unbalanced panel dataset consisting of Swedish firms between 2007 and 2019. We find significant evidence that Swedish SOEs engage in tax avoidance to a greater degree than non-SOEs with similar operating and financial characteristics, robust to various specifications. We contextualize our findings with theory such as corporate governance and principal-agent conflicts, highlighting the inherent contradictions of this particular ownership structure. The results are in line with previous research conducted in a European context, though in contrast with research in an East Asian context. However, to the best of our knowledge, the research question investigated in this study is the first of its kind.