Corporate giving and the case of tax avoidance

Qianhua Ling and Linxiao Liu

Advances in accounting, 2023, vol. 61, issue C

Abstract: Prior studies suggest that the association between corporate social responsibility (CSR) and tax avoidance is nuanced. Corporate giving, a CSR strength, is a discretionary activity primarily driven by management values. We propose that corporate giving promotes community-mindedness. Paying a fair share of tax is consistent with this value. We hypothesize that corporate giving and tax avoidance are negatively associated. Our findings support this hypothesis, suggesting that firms that generously contribute to charitable causes are less aggressive in avoiding tax. The association holds when tax avoidance is measured over a multi-year period, is more pronounced in a good economy, and is evident among highly profitable firms, firms subject to low political costs, and domestic firms.

Keywords: Corporate giving; Tax avoidance; Corporate social responsibility; Management values; Community-mindedness (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:advacc:v:61:y:2023:i:c:s0882611023000032

DOI: 10.1016/j.adiac.2023.100644

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