Many public firms highlight their Corporate Social Responsibilities (CSR) credentials in corporate communication with investors, analysts and the general public. Sceptics have argued that CSR firms often use Greenwashing strategies whereby their real actions and strategies are not entirely compatible with the “advertised” CSR credentials.
One question that is often raised in this context is whether CSR firms are also good taxpayers, as may be expected of CSR firms. But, perhaps they attempt to deflect attention to less benevolent activities, such as avoiding taxes. In particular, tax authorities may perceive CSR firms as good taxpayers and scrutinise less CSR firms.
Gilad Livne and two co-authors examined this possibility and found that, contrary to the notion that CSR firms engage to a lesser extent in tax avoidance, CSR firms manage to avoid taxation when a tax authority increases its enforcement threat. The paper speculates that managers of CSR firms are better skilled at tax planning than managers of firms that attract less public attention. For further reading see:
Gavious, I., Livne, G., & Chen, E. (2022). Does tax avoidance increase or decrease when tax enforcement is stronger? Evidence using CSR heterogeneity perspective. International Review of Financial Analysis, 84, 102325.