The Role of Tax Transparency Reporting in Corporate Governance and Social Responsibility Reporting

More firms are choosing to be more forthcoming with their tax information. What could be the reason for this change? This study examines the link between tax transparency reporting in corporate governance and corporate social responsibility reporting (CSR). Previous studies have been focused on tax avoidance and the link between corporate governance and CSR. This study systematically reviews literature to understand the role of tax transparency reporting in corporate governance and social responsibility reporting. The realisation that a number of multinational firms such as Amazon, Starbucks and Google pay virtually no tax has sparked public debate. These firms ‟tax practices may have been legal, but the “tax shaming” of these firms has resulted in public outrage and brand boycotts. The study investigated whether corporate governance and CSR are motivating companies to disclose their tax affairs voluntarily in their annual financial reports. The literature review revealed that the payment of taxes is a form of CSR. The study further revealed that good corporate governance equates to more voluntary disclosure of information and that good CSR disclosures are adversely aligned to tax aggressiveness, however the act of paying taxes outweighs other voluntary tax disclosures with regards to contributing towards CSR efforts. Therefore, for tax transparency to be perceived in a positive light, companies must pay taxes beyond any other voluntary tax disclosures. This link could be extremely useful to regulators and business managers so that they can strive to meet their corporate governance and social responsibility mandate through tax transparency disclosures.