Corporate digital transformation and tax uncertainty: evidence from China

PurposeCorporate digital transformation (CDT) has recently become an inevitable and important breakthrough in enterprise innovation. The economic consequences of CDT are widely debated as gimmicky or revolutionary. Meanwhile, the tax systems in many emerging markets are highly complex, and tax predictability and consistency are difficult to determine. This study examines how CDT influences tax uncertainty and what heterogeneous effects internal (financial constraints) and external factors (tax effort) of the company have on this relationship.Design/methodology/approachThis study selected a sample of A-share listed companies on the Shanghai and Shenzhen Stock Exchanges from 2008 to 2023. The order least squares method was used as the main model, and cross-sectional and mediating mechanism models were also used as further tests.FindingsOur findings suggest that CDTs have lower tax uncertainty than non-CDTs by increasing risk management awareness and improving the quality of accounting information. This relationship is more pronounced among firms with weaker financial constraints and regions with stronger tax administration. Additionally, under the impact of the coronavirus pandemic, companies adopting CDT strategies are more effective in reducing tax uncertainty.Originality/valueThis study expands on the factors influencing tax uncertainty by examining digital technology development. Meanwhile, it enriches the literature on the economic consequences of CDT by exploring its positive impact on tax risk management. Moreover, it provides an important reference for governments to actively embrace and leverage emerging digital technologies to create a favorable tax environment. It also guides enterprises to use CDT-related technologies, especially in the construction of tax management systems.