Danish Ministry of Finance

Abstract Empirically, the effect of corporate tax rates on leverage has been smaller than expected based on trade-off theory. In this article, I show that tax avoidance functions as a non-debt tax shield, reducing the benefits of the debt tax shield. I find that higher tax rates cause higher non-debt tax avoidance, which crowds out the debt tax shield. Moreover, I show that the strength of the relationship between debt and tax rates depends on the level of tax avoidance. A 1-standard-deviation higher tax rate implies 2.8% higher leverage for low tax avoidance firms, but has a negative effect for high tax avoidance firms.

Abstract Prime Minister Suga Yoshihide passed a set of digital laws in 2021, which enabled the establishment of the Digital Agency as a central element in the e-government and the digital transition in Japan. Despite its great significance, the laws were prepared and passed in a record-breaking time. This article sets out to determine the factors contributing to the swift acceptance and success of the digital law package utilizing the multiple stream framework by John W. Kingdon. It demonstrates how Suga’s ambitions coincided with a unique policy window opened by an unlikely confluence of the global pandemic and a persistent policy community.