The effects of labor investment inefficiency on corporate tax avoidance activities

Considering the role of taxation in the administration of each country, this study was conducted to study the effects of labor investment inefficiency on corporate tax avoidance activities.

The research methodology is a quantitative and ex-post. For doing statistical analysis, the linear regression analysis was used by using the panel data method. Data related to 124 companies listed on the Tehran Stock Exchange during the period 2009-2020.

The research results showed that inefficiency of investment in labor has positive effects on tax avoidance and can play an important role in corporate tax decisions. Also, there is a positive (negative) relationship between overinvesting (underinvesting) in labor and tax avoidance. In addition, the evidence showed that when companies have limitation in funding, there is no difference in the intensity of this positive relationship.

Increase in ambiguity, weaker control environment and reduction in expected cash flows due to inefficiency of investment in the workforce provide opportunities and context for the company's management to increase tax avoidance, thus, those involved in the field of taxation should pay special attention to this issue.

 Rendering evidence about the effects of labor inefficiency investment on tax avoidance considering the role of constraints in financing can be introduced as knowledge Enrichment in this study.