Differentiated Tax Strategies for Companies according to Market Position

[Purpose] This research studied the differences in tax strategies of companies according to their market position, particularly the difference in the degree of tax avoidance between leading companies and following companies. [Methodology] Since a leading company is more likely to maintain a consistent revenue and be able to easily obtain necessary capital, there is little need for them to perform an aggressive tax strategy with a high political cost and audit risk. On the other hand, a following company is more likely to adopt an aggressive tax strategy and reduce taxes to increase free cash flow. In order to prove this, differences in tax avoidance by market position was observed. Tax avoidance measurement by Desai and Dharmapala (2006) was used as the dependent variable and market position variable as the independent variable. [Findings] Analysis showed that the two variables had a significant negative association, demonstrating that following companies are performing tax avoidance more aggressively than leading companies. [Implications] This study can be used as evidentiary material for tax authorities during tax audits. Tax audit criteria is a very important start in the current tax auditing process that is expanding on tax audit by non－regular selection. Therefore, this study may become a key academic evidence for tax authorities in providing criteria for tax auditing by non－regular selection.