Corporate Social Responsibility, Tax Avoidance, and Tax Aggressiveness

Abstract:     
I examine the relationship between corporate social responsibility, tax avoidance, and tax aggressiveness. I find evidence of a general negative relation between CSR and effective tax rates (ETRs). This relationship is driven by socially responsible firms, which have lower ETRs than other firms consistent with greater tax avoidance. Socially responsible firms also have higher unrecognized tax benefits than other firms, consistent with greater tax aggressiveness. The results suggest that firms are not willing to reduce their profits in order to demonstrate social responsibility on a tax dimension, confirming a Friedman (1970) shareholder view of corporate social responsibility in which firms undertake socially responsible actions only when it is profit-maximizing.

Number of Pages in PDF File: 22

working papers series