Tax Strategy Disclosure: A Greenwashing Mandate?

TRR 266 Accounting for Transparency Working Paper Series No. 40

74 Pages Posted: 29 Sep 2020 Last revised: 29 Feb 2024

See all articles by Katarzyna Anna Bilicka

Katarzyna Anna Bilicka

Utah State University

Elisa Casi

Norwegian School of Economics (NHH) - Department of Business and Management Science

Carol Seregni

University of Pennsylvania - Accounting Department

Barbara Stage

WHU - Otto Beisheim School of Management

Date Written: February 26, 2024

Abstract

We investigate the effects of a qualitative tax disclosure mandate aimed at improving tax transparency and compliance by imposing reputational costs for firms. We use, as an exogenous shock, the 2016 UK reform that required large businesses to disclose their tax strategy. We find that treated firms—those that must publish a tax strategy report—also significantly increase the volume of tax strategy disclosure in their annual reports but this disclosure contains more boilerplate. The standalone tax strategy reports contain narratives similar to those in the annual reports, are sticky, and their quality is correlated with those of disclosures on gender and human rights. Turning to real behavioral changes, we document no significant effect on tax planning across several proxies and firm characteristics. While we find that the mandate increased media attention on treated firms, our results suggest that this enforcement channel might not work in the context of qualitative disclosure, which may be hard to verify for outside stakeholders. Even in subsamples of firms that we would expect to behave differently, we document similar responses. Taken together, our findings indicate that mandating qualitative tax disclosure has incentivized firms to portray themselves as good tax citizens without changing their practices.

Keywords: Disclosure Regulation, Nonfinancial Disclosure, Corporate Social Responsibility, Tax Transparency, Corporate Tax Avoidance

JEL Classification: G38, M41, M48, H26, H20

Suggested Citation

Bilicka, Katarzyna Anna and Casi-Eberhard, Elisa and Seregni, Carol and Stage, Barbara, Tax Strategy Disclosure: A Greenwashing Mandate? (February 26, 2024). TRR 266 Accounting for Transparency Working Paper Series No. 40, Available at SSRN: https://ssrn.com/abstract=3672420 or http://dx.doi.org/10.2139/ssrn.3672420

Katarzyna Anna Bilicka

Utah State University ( email )

Elisa Casi-Eberhard (Contact Author)

Norwegian School of Economics (NHH) - Department of Business and Management Science ( email )

Bergen, 5045
Norway

Carol Seregni

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Barbara Stage

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

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