An Empirical Study of Tax Avoidance Strategies and Corporate Social Responsibility Reporting Alignment

Posted: Aug 09, 2019

• David Taylor
• David Young
• Elijah Allen

Abstract

This research presents a novel empirical investigation into the complex relationship between corporate tax avoidance strategies and corporate social responsibility (CSR) reporting alignment, employing an innovative methodological framework that combines natural language processing, network analysis, and institutional theory. Unlike previous studies that have treated tax avoidance and CSR as separate domains, this paper introduces the concept of 'fiscal-social alignment' as a multidimensional construct that captures the coherence between a firm's tax positioning and its social responsibility narrative. Our methodology analyzes 2,500 corporate annual reports and CSR disclosures from Fortune 500 companies over a ten-year period, utilizing advanced text mining techniques to extract latent patterns in tax-related discourse and CSR commitments. The findings reveal three distinct alignment archetypes: synergistic alignment, where aggressive tax strategies are coupled with robust CSR investments; decoupled alignment, characterized by dissonance between tax minimization and social responsibility claims; and strategic misalignment, where CSR reporting serves as legitimizing rhetoric for aggressive tax positions. The study contributes to the literature by developing a novel measurement framework for fiscal-social alignment and demonstrating how institutional pressures, stakeholder expectations, and regulatory environments shape corporate behavior at the intersection of tax strategy and social responsibility. This research provides original insights for policymakers, investors, and corporate governance practitioners seeking to understand the complex interplay between fiscal optimization and social accountability in contemporary corporate practice.