Do Socially Responsible Firms Pay More Taxes?

TLDR

Existing theory and empirical studies find inconsistent evidence on the relationship between corporate social responsibility and corporate tax payments. The study investigates whether corporate social responsibility and tax payments act as complements or substitutes. The authors use ordinary least squares and simultaneous equations to estimate the relationship between CSR measures and both corporate tax payments and lobbying expenditures. CSR is negatively related to five‑year cash effective tax rates and positively related to tax lobbying expenditures, indicating that CSR and tax payments act as substitutes. Data are available from the sources cited in the paper.

Abstract

ABSTRACT We investigate the relation between corporate tax payments and corporate social responsibility. Because existing theory and empirical studies find inconsistent evidence on the relation between these constructs, we investigate whether the two activities act as complements or substitutes. We estimate the relation between measures of corporate social responsibility and (1) the amount of corporate taxes paid, and (2) the amount invested in tax lobbying activities using both ordinary least squares and a system of simultaneous equations. We find consistent evidence that corporate social responsibility is negatively related to five-year cash effective tax rates and positively related to tax lobbying expenditures. Our evidence suggests that, on average, corporate social responsibility and tax payments act as substitutes. Data Availability: Data are available from sources identified in the paper.