Tax Strategy Disclosure: A Greenwashing Mandate?

Katarzyna Bilicka, Elisa Casi, Carol Seregni and Barbara Stage

No 9030, CESifo Working Paper Series from CESifo

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 (search for similar items in EconPapers)
JEL-codes: G38 H20 H26 M41 M48 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Tax strategy disclosure: A greenwashing mandate (2022)
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