Newswise — (Washington, D.C.) November 15, 2017 – Most legislators and regulators seeking to curb tax avoidance have been doing it all wrong, says American University Kogod School of Business Professor Mark (Shuai) Ma.

And he’s got the data to prove it.

Ma’s coauthored research study, Legal Environment and Corporate Tax Avoidance: Evidence from State Tax Codes, examined penalties for tax avoidance in all 50 states. Ma finds that higher criminal penalties on individual corporate officers, not civil penalties levied against corporations, are the key to curbing aggressive tax evasion and avoidance by corporations.

“Corporations that fail to pay their fair share of taxes potentially reduce social welfare and place a disproportionate tax burden on individual tax payers,” Ma says. “To reduce tax avoidance, governments could increase penalties on either the corporation in the form of civil penalties, or directly on the manager in the form of criminal penalties. The findings suggest that higher criminal penalties on managers reduce aggressive tax avoidance. However, most recent legislation proposals in the U.S., U.K. and many other countries, such as the recently proposed Stop Tax Haven Abuse Act, focus on civil penalties levied against corporations.”

Ma’s research also finds that states that get tough on corporate tax cheats may not be at risk of losing companies to states with lower penalties. When New York raised its criminal penalties from a maximum of four years to a maximum of 25 years, Ma found that aggressive tax avoidance decreased and most companies remained in the state.

“From a policy perspective, the implication is that if the costs of implementing the two penalties are equal, authorities should favor criminal penalties on officers over civil penalties on the corporation,” Ma adds.


About the Kogod School of Business American University is known for its distinctive character – a place where students learn from leaders in their fields and are engaged in active citizenship. Our Washington, D.C. location serves as a laboratory for learning through work, internships, and other forms of experiential education.

The Kogod School of Business embodies this character. We know that doing business in the capital, where all industries and all sectors meet, is unlike doing business anywhere in the world and we are committed to preparing our graduates to excel in this elite environment.

Kogod is accredited by The Association to Advance Collegiate Schools of Business (AACSB). To learn more about the Kogod School of Business, visit