Tax Strategy Disclosure: A Greenwashing Mandate?

77 Pages Posted: 23 Apr 2021

See all articles by Katarzyna Anna Bilicka

Katarzyna Anna Bilicka

Utah State University; University of Oxford - Oxford University Centre for Business Taxation

Elisa Casi

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

Carol Seregni

University of Pennsylvania - Accounting Department; University of Mannheim

Barbara Stage

WHU - Otto Beisheim School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: 2021

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 a 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 similar narrative as the annual reports, are sticky, and their quality is correlated with those of other sustainability 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: G380, M410, M480, H260, H200

Suggested Citation

Bilicka, Katarzyna Anna and Casi-Eberhard, Elisa and Seregni, Carol and Stage, Barbara, Tax Strategy Disclosure: A Greenwashing Mandate? (2021). CESifo Working Paper No. 9030, Available at SSRN: https://ssrn.com/abstract=3832485 or http://dx.doi.org/10.2139/ssrn.3832485

Katarzyna Anna Bilicka (Contact Author)

Utah State University ( email )

Logan, UT 84322
United States

University of Oxford - Oxford University Centre for Business Taxation ( email )

Saïd Business School
Park End Street
Oxford, OX1 1HP
United Kingdom

Elisa Casi-Eberhard

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

University of Mannheim ( email )

Universitaetsbibliothek Mannheim
Zeitschriftenabteilung
Mannheim, 68131
Germany

Barbara Stage

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

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