This research investigates the impact of corporate tax strategies on consumers’ corporate social responsibility perceptions, willingness to pay, and attitude toward the firm in two laboratory experiments in the United States and Germany. Using the Becker–DeGroot–Marschak incentive-compatible mechanism, which avoids a social desirability bias found in prior research, our results indicate only a minor indirect effect of corporate tax strategies on WTP by way of the mediator CSR perceptions. However, we find a strong effect on attitude toward the firm again (...) mostly mediated by CSR perceptions. In contrast to German consumers, U.S. consumers’ CSR perceptions of tax avoidance are independent of whether a strategy is likely accepted by the tax authorities. Overall, we conclude that CSR perceptions are highly relevant when it comes to consumer responses to tax avoidance. (shrink)

This manuscript proposes that tax avoidance can be better understood and mitigated as a sustainability problem. Tax avoidance is not just a financial problem for tax authorities, but one that erodes critical common spaces necessary for the smooth functioning of regulatory compliance, organizational integrity, and society. Defining tax avoidance as a sustainability problem offers a broader and more holistic understanding of the organizational and societal consequences of tax avoidance behavior. Sustainability is also a mature and legitimized concept that can readily (...) incorporate taxation. A variety of established sustainability metrics have the capacity to incorporate anti-tax avoidance measures or publicize firms that engage in fair tax practices. This manuscript concludes that integrating sustainability principles, in conjunction with important extant work on corporate social responsibility and taxation, can advance the goals of decreasing the occurrence and acceptability of tax avoidance. (shrink)

Setting up affiliated companies in tax havens is a legitimate, but ethically dubious, business practice. This study examines the conditions under which emerging business groups tend to use such a business practice. Business groups in emerging economies have been operating in weak institutional environments with substantial government intervention and ineffective market-supporting institutions. Having offshore companies in tax havens enables the groups to bypass some market transaction costs and institutional constraints, and it also provides them the opportunity to evade taxes and (...) hide illegal conduct, such as bribery. Empirical evidence based on a sample of Taiwanese business groups showed that business groups with a higher level of prosocial orientation established fewer offshore companies in tax havens, as manifested by their commitment of resources to establishing nonprofit organizations. In contrast, groups that have higher levels of product and international diversification tend to use this ethically dubious business practice. However, highly internationalized groups are less likely to do so when they have committed substantial resources to prosocial activities. (shrink)

Abraham’s “leadership by example” provides a template for business leaders to implement a tone at the top based on a balance of tzedek (righteousness) and mishpat (legal judgement). The former expresses the generosity of spirit required of leaders, while the latter expresses the sound judgement in conformity with both ethics and enacted law. We relate the two constructs to several contemporary theories of justice and jurisprudence. We also relate the development of Abrahamic Justice in the Jewish tradition from antiquity through (...) Maimonides in the middle ages. We draw insight from this tradition to answer a contemporary business ethics question: Do corporate managers violate their fiduciary duty to shareholders if they refuse to engage in legal tax avoidance? (shrink)

AbstractForeign direct investment (FDI) in offshore financial centers (OFCs) is gaining increased attention in business ethics research. Much of this research tends to focus on OFCs as locations where firms can avoid taxes, considering such behavior as unethical. Yet, there is dearth of studies on capital round-tripping by emerging market firms, which is an integral part of this phenomenon. Such round-tripping involves firms sending capital into OFCs only to invest it back in the home country under the guise of “foreign” (...) investment. Presently there is little discussion of the ethical implications of such round-trip FDI activities. In this paper, we conceptualize round-tripping as institutional arbitrage and look at the determinants and ethical implications of such investments into OFCs. Exploring Russian round-tripping we note that firms tend to invest more funds in OFCs that offer a combination of tax and secrecy, or secrecy and property rights protection arbitrage opportunities. In either case firms exploit the opportunities provided by institutional differences between the OFC and Russia while investing back into Russia. Our results tend to indicate that equating OFC investment to tax avoidance and thus deeming it as unethical behavior is too narrow an explanation in the case of emerging economy round-tripping. This is because such investments are often motivated by the unethical behavior of home country stakeholders and may in fact provide benefits to society. (shrink)

We examine the impact of a city’s cultural diversity on a firm’s tax avoidance. Our findings suggest that when a firm is located in a culturally diverse city, it exhibits less TA than a firm located in a less culturally diverse city. The findings are robust to alternative metrics of cultural diversity and TA and after accounting for omitted sample bias and endogeneity. Additional analysis suggests that the negative impact of cultural diversity on a firm’s TA is more salient in (...) a firm with strong managerial incentives or in a city that is characterized by more migration. Furthermore, we document that the negative impact of cultural diversity on TA is more pronounced when firms face strong financial constraints or effective internal and external monitoring. (shrink)

A growing body of literature documents the important role played by moral outrage or moral anger in stakeholders’ reactions to cases of corporate social irresponsibility. Existing research focuses more on the consequences of moral outrage than a systematic analysis of how appraisals of irresponsible corporate behavior can lead to this emotional experience. In this paper, we develop and test, in two field studies, an extended model of moral outrage that identifies the cognitions that lead to, and are associated with, this (...) emotional experience. This research contributes to the existing literature on reactions to corporate social irresponsibility by explaining how observers’ evaluation of irresponsible corporate behavior leads to reactions of moral anger. The paper also helps clarify the difference between moral outrage and other types of anger and offers useful insights for managers who have to confront public outrage following cases of irresponsible corporate behavior. Finally, the analysis of the causes of stakeholders’ anger at irresponsible corporations opens important avenues for future research that are presented in the paper. (shrink)

Like COVID-19, new infectious disease outbreaks emerge almost annually, and studies predict that this trend will continue due to a variety of factors, including an aging population, ease of travel, and globalization of the economy. In response to episodic public health crises, governments and organizations develop, implement, and enforce policies, procedures, protocols, and programs. The epidemiological triad is both a model of disease causation and fundamentally used to design and deploy such control measures. Here we adapt this model to the (...) workplace setting and use the epidemiological triad to characterize the related ethical challenges in implementing the control measures employers face as a guide for a workplace intervention framework. Through this approach, our aim is to show how an integrated ethical framework, grounded in epidemiological principles, has important implications for how we categorize, understand, and resolve the difficult decisions that emerge in the workplace under pandemic conditions. (shrink)

Corporations have increasingly been called on to assume responsibilities for paying fairer shares of tax, while, at the same time, governments have been repeatedly urged to develop more effective corporate tax systems to tackle tax avoidance. Therefore, institutional attributions of tax responsibility for companies seem to have features of both explicit and implicit corporate social responsibility (CSR). However, given that we lack a clear understanding of which form or forms of CSR in relation to tax are expected of companies and (...) how exactly this might be changing, we examine the evolution in institutional expectations of explicit and implicit CSR for corporate taxation. Drawing on a longitudinal content analysis of 992 news media articles from the United Kingdom between 2000 and 2021, we find that institutional expectations of corporate tax responsibility have followed a process of continuous and non-linear hybridization characterized by a pendulum-like trajectory of explicitization followed by implicitization. We discuss the implications of these findings for the theory and practice of corporate tax responsibility and the framework of explicit/implicit CSR. (shrink)

This study adopts moral reasoning strategies to investigate why consumers support companies involved in ethical transgressions. Drawing on several cases of real multinationals publicly involved in tax avoidance practices, it aims to demonstrate that moral rationalization and moral decoupling depend not only on how consumers perceive the magnitude of the transgression, but also on their individual differences, such as political ideology and brand identification. A quantitative study with a sample of 3989 consumers of five different focal brands was employed to (...) test a set of hypotheses. Findings reveal that moral decoupling directly explains purchase intentions. However, rationalization only explains behavioral intentions if it leads to a reduction in the perceived immorality of the action. Furthermore, the study reveals significant differences across personal values. Left-leaning individuals tend to rationalize less and decouple more when they perceive that the magnitude of the transgression as egregious. Interestingly, consumers who are highly identified with the brand are less affected by the transgression and tend to be more supportive toward the brand by engaging in rationalization mechanisms. (shrink)

Managers of multinational companies often favour an aggressive tax avoidance strategy that pushes the legal limits onto the advantage of shareholders and the disadvantage of the spirit of democratically legitimized tax laws. The public and media debate whether such aggressive behaviour is immoral. Aggressive tax avoidance is a subset of the aggressive legal interpretations potentially observable in all fields which places little weight on the will of a democratically legitimized legislation. A thorough ethical analysis based on the deontological approach of (...) Kant demonstrates that aggressive tax avoidance as a special case of operating on the edge of legal boundaries is potentially immoral. Applying the Kantian “contradiction of conception or will” test shows that this maxim might not be conceived or willed as a general law of nature. If all natural or legal persons aggressively interpret laws on all subjects and in every imaginable situation, then central principles of the system of law we all rely upon would be severely compromised. Therefore, aggressive tax avoidance by managers of multinational companies may violate the managers’ moral duty to obey not only the letter but also the intention or spirit of the law. The validity of the argumentation depends critically on the formulation and interpretation of the respective maxims and on assumptions about the legal system. Preserving central elements of Kantian philosophy, the article demonstrates the complexity of a philosophical argumentation which tries to justify the moral intuitions that underpin the common negative evaluation of aggressive legal strategies in business. (shrink)

Using an international sample of firms from 32 countries, we study the relation between media independence and corporate tax aggressiveness. We measure media independence by the extent of private ownership and competition in the media industry. Using an indicator variable for tax aggressiveness when the firm’s corporate tax avoidance measure is within the top quartile of each country-industry combination, we find strong evidence that media independence is associated with a lower likelihood of tax aggressiveness, after controlling for other institutional determinants, (...) including home-country tax system characteristics. We also find that the effect of media independence is more pronounced when the legal environment is weaker, and when the information environment is less transparent. We contribute to the business ethics literature by documenting the role of independent media as an external monitoring mechanism in constraining corporate tax aggressiveness. (shrink)

Motivated by the ongoing controversy surrounding corporate tax, this article presents a study that explores stakeholder expectations of corporate tax in the context of UK business. We conduct a qualitative analysis of in-depth interviews with representatives of community groups, as well as interviews with those representing business groups. We then identify eight themes that together describe “what” companies need to do, “how” they need to do it, and “why” they need to do it, if they wish to appeal to a (...) wide group of interested parties. We discuss our findings based on the corporate social responsibility literature and propose novel ways for community groups and business groups to connect on the topic of corporate tax, suggesting opportunities and themes for dialogue and potential steps to co-create solutions in a stakeholder society. (shrink)

This study investigates the conditions under which host country portfolios are more likely to regularize corporate tax behavior. We use a sample comprising data on Japanese multinationals covering 2004 to 2014 to examine the relationship between foreign direct investment host country portfolios and tax avoidance from the perspectives of investor protection and ethical standards. Our multivariate regression results show that the number of countries with strong investor protection/high ethical standards in the FDI host country portfolio is negatively related to tax (...) avoidance. We also find that the effect of investor protection/ethical standards is less pronounced when the degree of indulgence is high. Further analyses show that the relationships we find are affected by disclosure requirements, local regulations, and accounting standards. These findings remain unchanged after several sensitivity checks. Overall, this study contributes to the business ethics literature by showing that FDI host country investor protection and ethical standards are external monitoring mechanisms for mitigating tax avoidance by multinationals. (shrink)

The commitment not to engage in tax avoidance – to refrain from using aggressive tax planning techniques – has not become part of the corporate social responsibility agenda in Poland. The purpose of this paper is to examine justificatory and explanatory reasons of that significant absence. The analysis unfolds in the following way. After setting out the necessary terminological background, I present main results of the limited empirical study of selected CSR documents, in order to substantiate the claim that tax (...) avoidance is a theme absent from the CSR programs in Poland. Then I put forward the contention that this commitment should be included in such programs, as prima facie justified, and address a selection of objections that can be raised to defeat this contention. Finally, in the last section of the paper, I briefly comment on possible reasons of this absence and show how they elucidate the nature of CSR. (shrink)

This study examines the endogenous relation between corporate social responsibility and tax avoidance by focusing on a common strategy of corporate tax avoidance, i.e., establishing entities in offshore tax havens. Using hand-collected data on a sample of U.S. firms, we find that firms’ CSR ratings increase substantially in the two years after they first open tax haven affiliates. We provide evidence by using the controlled foreign corporations look-through rule enacted by Congress in 2006 that facilitates offshore profit shifting. We find (...) that firms that are affected by the CFC legislation increase their CSR practices in response. Overall, our results are consistent with the risk management theory, which argues that firms hedge against the potential negative consequences of aggressive tax avoidance practices through an increase in positive CSR activities. (shrink)

In this paper, we consider the relationships among corporate accountability, reputation, and tax behavior as a corporate social responsibility issue. As part of our investigation, we provide empirical examples of corporate reputation and corporate tax behaviors using a sample of large, U.S.-based multinational companies. In addition, we utilize corporate tax controversies to illustrate possibilities for aggressive corporate tax behaviors of high-profile multinationals to become a reputation threat. Finally, we consider whether reputation serves as an accountability mechanism for corporate tax behaviors (...) among other mechanisms for holding firms accountable for corporate tax behaviors. Our conceptual work points to a complicated relationship among shareholder, stakeholder, and civic responsibilities in the development and execution of firm’s corporate tax strategies. Building on those insights, our empirical illustration considers corporate reputation data alongside data which reflects corporate tax behavior. Based on this work, we find no clear trend or pattern indicating that reputation is associated with or affected by certain types of corporate tax behaviors. That is, our exploratory empirical illustration suggests that corporate tax behavior does not produce broad reputational consequences that would motivate a change in firm behavior. Drawing from celebrity and strategic silence research, we then suggest that reputation may not be a well-functioning mechanism for holding corporations to account for contributing their fair share of the resources used by government for the benefit of society and offer-related theoretical insights. (shrink)