The impact of Tax avoidance and tax risk on the cost of debt

Taxes are one of the biggest cost items for most companies, so they provide companies with a strong incentive to reduce their tax burden in a way called tax avoidance. If tax activity is a substitute for using debt, it can be quality. Increase debt, reduce the expected costs of bankruptcy, and reduce the risk of debt default and, ultimately, debt costs. Tax risk can be due to the company's tax planning strategies. Therefore, the purpose of this study is to investigate the effect of tax risk and tax avoidance on the borrowing costs of companies listed on the Tehran Stock Exchange. The statistical sample of the research of companies listed on the Tehran Stock Exchange during the years 1390 to 1397 with a sample of 205 companies. Multivariate linear regression and hybrid data using the generalized least squares model have been used to test the hypothesis. The results of testing the first hypothesis showed that tax avoidance has a significant and direct effect on borrowing costs. Also, the results of testing the second hypothesis showed that tax risk has a significant and inverse effect on borrowing costs. And in the third hypothesis, the results of the hypothesis test showed that the risk indicator has a significant and inverse effect on the relationship between tax avoidance and borrowing costs. The results of multivariate analysis show that companies that avoid paying taxes pay higher interest rates on their debts. Creditors obviously see tax avoidance as a source of credit risk.