Tax Aggressiveness: Political Cost Theory or Political Power Theory?
Tax Aggressiveness: Political Cost Theory or Political Power Theory?

Summary/Abstract: The study reviewed empirical literature on tax aggressiveness: focusing on the theories of political cost and political power to determine which of these theories drove tax aggressiveness more. Employing a library research methodology, the study discovered that prior findings on tax aggressiveness and political power produced mixed outcomes due to the absence of known proxies, making the results non-comparable. Conversely, political cost being measurable, allowed for comparison across studies and periods. The study recommends that firms should exercise caution when employing tax aggressive practices so as to avoid crossing into tax evasion. The study calls for more empirical research to be carried out particularly as it relates to political power and tax aggressiveness to provide clearer insights.

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