Corporate Social Responsibility and Tax Aggressiveness

Abstract

This paper examines the relationship between corporate social responsibility (CSR) and tax aggressiveness. An model is developed showing that a profit maximization firm is willing to incur additional costs in CSR, such as paying more taxes, as long as they could differentiate their products from non-CSR firms, and socially conscious consumers will buy products from CSR firms at a higher price than those of non-CSR firms. The empirical results using Canadian companies listed in the S&P/TSX 60 index indicates that socially responsible firms are less likely to undertake aggressive tax activities, while those firms who are less interested in being socially responsible are more likely to undertake aggressive tax activities.