Design and analysis of the tax game between the company and the state using the games theory

Based on the theory of representation, it is assumed that corporate executives ignore the interests of shareholders, owners, government and other stakeholders in order to maximize their utility, and jeopardize the interests of others to achieve their own interests. The government, as one of the stakeholders, seeks to maximize its benefits, namely, the diagnostic tax, and on the other hand, the company also seeks to maximize its utility by avoiding taxes. Therefore, government strategy, strong corporate governance and corporate strategy are tax avoidance. So the purpose of the research is, firstly, to determine the impact of corporate governance on tax avoidance, and secondly, to seek to find the equilibrium point in conflict between the interests of taxpayers and tax authorities using game theory, in which the parties are satisfied with their own interests. Hypotheses were analyzed using combined data of financial statements of 62members of Tehran Stock Exchange between 2012 and 2018 by using the best-response function, Mann-Whitney test and regression tests. According to the research findings, the relationship between tax avoidance and corporate governance was negatively and significantly. It was also concluded that, in combining the strategy of tax acceptance and the strong corporate governance strategy, the parties to the game play a balance in their own interests, which is the prevailing Nash equilibrium.