Is Corporate Social Responsibility (CSR) Associated with Tax Avoidance? Evidence from Irresponsible CSR Activities

52 Pages Posted: 17 Jun 2013 Last revised: 27 Aug 2015

See all articles by Chun Keung (Stan) Hoi

Chun Keung (Stan) Hoi

Rochester Institute of Technology - Saunders College of Business

Qiang Wu

Rensselaer Polytechnic Institute (RPI) - Lally School of Management

Hao Zhang

Rochester Institute of Technology (RIT) - Saunders College of Business

Date Written: June 17, 2013

Abstract

We examine the empirical association between corporate social responsibility (CSR) and tax avoidance. Our findings suggest that firms with excessive irresponsible CSR activities have a higher likelihood of engaging in tax sheltering activities and greater discretionary/permanent book-tax differences. Moreover, at the onset of FASB Interpretation No. 48, these firms have more uncertain tax positions; also, these firms’ initial tax positions are likely supported by weaker facts and circumstances as indicated by their larger post-FIN 48 settlements with tax authorities and their higher likelihood of a net decrease in the overall level of uncertain tax positions after FIN 48. Collectively, these results suggest that firms with excessive irresponsible CSR activities are more aggressive in avoiding taxes, lending credence to the idea that corporate culture affects tax avoidance.

Keywords: Corporate Social Responsibility, Tax Avoidance, Tax Aggressiveness, Corporate Culture, FIN48

JEL Classification: H20, M14, M41

Suggested Citation

Hoi, Chun Keung (Stan) and Wu, Qiang and Zhang, Hao, Is Corporate Social Responsibility (CSR) Associated with Tax Avoidance? Evidence from Irresponsible CSR Activities (June 17, 2013). Accounting Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2280558

Chun Keung (Stan) Hoi

Rochester Institute of Technology - Saunders College of Business ( email )

105 Lomb Memorial Drive
Rochester, NY 14623
United States
585-475-2718 (Phone)

Qiang Wu (Contact Author)

Rensselaer Polytechnic Institute (RPI) - Lally School of Management ( email )

110 8th St
Troy, NY 12180
United States
518-276-3338 (Phone)
518-276-8661 (Fax)

Hao Zhang

Rochester Institute of Technology (RIT) - Saunders College of Business ( email )

105 Lomb Memorial Dr.
Rochester, NY 14623
United States

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