A Review of Corporate Social Responsibility and Reputational Costs in the Tax Avoidance Literature*

Abstract

In recent years, academic researchers, policymakers, and the public have increasingly focused on the tax avoidance behavior of corporations. At the same time, firms are increasingly pressured to incorporate corporate social responsibility (CSR) into their decision making, leading to heightened academic interest in CSR. Given that opponents of corporate tax avoidance often argue that avoiding tax is socially irresponsible, we review the growing literature surrounding this issue. We begin with a theoretical review of how corporate tax avoidance fits into the CSR framework. We then review the empirical evidence on the interrelationship between CSR and firm reputation in the tax avoidance literature. We frame our review around three questions: (i) Do firms view tax avoidance as a CSR issue? (ii) Do stakeholders view tax avoidance as socially irresponsible, leading to reputational costs of tax avoidance? And (iii) Do firms change their tax avoidance behavior due to fear of these reputational consequences? Throughout our review, we provide discussions on the state of the current literature and offer suggestions for future research opportunities.