Political connections, government support and SME tax payments: A note from fixed-effect quantile regression

• Published in: Finance research letters 2021-05, Vol.40, p.101771, Article 101771
• Main Authors: Minh, Thanh Nguyen, Kim, Van Pham Thi, Ngoc, Anh Mai
• Format: Article
• Language: English
• Subjects: Government support; Political connection; Quantile approach; SMEs; Tax payment
• ISSN: 1544-6123; 1544-6131
• DOI: 10.1016/j.frl.2020.101771

•This study contributes to the literature by examining for the first time the effect of political connections and government support on tax payment in Vietnam.•Using fixed-effect quantile regression for a panel dataset from 2009 to 2015, statistically positive linkages between government support and tax payment have been observed only at high percentiles.•However, private SMEs with politically connected directors make lower tax payments than SMEs without such managers in all percentiles.•The estimation results reveal that policymakers need to increase effective measures to reduce the adverse effects of political connections on state revenue. Using fixed-effect quantile regression for a panel dataset from 2009 to 2015, this study contributes to the literature by examining for the first time the effect of political connections and government support on tax payment in Vietnam. While statistically positive linkages between government support and tax payment have been observed only at high percentiles, private SMEs with politically connected directors make lower tax payments than SMEs without such managers in all percentiles. The results imply that policymakers need to increase effective measures to reduce the adverse effects of political connections on state revenue.