Tax administration reform and corporate tax avoidance: evidence from an emerging market

This study examines the effect of tax administration reform on corporate tax avoidance following the implementation of Vietnam’s Tax Administration Law No. 38/2019/QH14. Exploiting the reform as an exogenous institutional shock characterized by digitalized tax monitoring, including mandatory electronic invoicing and inter-agency data integration, we employ a dynamic Difference-in-Differences (DiD) design combined with Coarsened Exact Matching (CEM). The findings show that enhanced technological enforcement significantly constrains tax avoidance, reflected in reductions in Abnormal and Total Book-Tax Differences (ABTD and BTD) and increases in GAAP and Cash Effective Tax Rates (GAAP_ETR and CASH_ETR). Event-study results further indicate that the effect strengthens progressively after the reform. Notably, firms also exhibit anticipatory responses during the 2018–2019 legislative drafting period. Overall, the evidence demonstrates that legal modernization and digital enforcement can strengthen tax compliance, constrain managerial opportunism, and enhance fiscal discipline.