The relationship between (Tax) transparency and tax aggressiveness

The relationship between (Tax) transparency and

tax aggressiveness

Master Thesis Accountancy University of Groningen Faculty of Economics and Business Mike Jagt Student number: 1686224 Rachmaninoffplantsoen 33 3533JX Utrecht m.jagt.1@student.rug.nl

18-03-2016

Abstract

The public attention regarding the tax policy of multinationals is increasing the last couple of years. It seems that, besides taking care of people and planet, paying a “fair share” of corporate tax is becoming an important aspect of the corporate social responsibility (CSR). However literature is inconclusive about whether taxation is part of the social responsibility of a company, or that it should only care about creating shareholders’ wealth. This research empirically investigates the relationship between CSR disclosure and tax aggressiveness. A company who values CSR and CSR disclosure is expected to view aggressive tax planning as not socially responsible. The specific part of CSR disclosure about taxation is being highlighted in this study by using a unique dataset about tax transparency. The sample consists of 63 companies from the Netherlands, of which financial, CSR transparency and tax transparency information was obtained. Results show that a company which scores better on CSR transparency have a decreased tax aggressiveness. This result confirms that highly social responsible companies see taxation as part of their social responsibility. The testing of the relationship between tax transparency and tax aggressiveness show no significant relationship.

Table of content

Abstract 2 1. Introduction 4 2. Theoretical framework 8 3. Hypotheses development 12 4. Research Design 15 4.1. Sample design and data collection 16 4.2. Dependent variable 17 4.3. Independent variables 18 4.4. Control variables 19 4.5. Model 21 5. Results 22 5.1 Descriptive statistics 22 5.2 Correlation analysis 23 5.3 Multivariate analysis 24 6. Discussion and conclusion 26

1. Introduction

‘’Apple paid only 2% corporation tax outside US’’ this is just one of the many headlines we see in the media nowadays (BBC, 2012). Tax behavior of companies is being scrutinized and covered by the media extensively. This trend suggests paying a “fair share” of corporate tax is an attribute that is part of the responsibility of doing business today. Companies have a social responsibility beyond making profit, for example, they have to be good for their employees and the environment. The view of Friedman (1970) that “the social responsibility of business is to make a profit” seems to be outdated. Companies should make a positive impact on society is the new view, which is defined in the term corporate social responsibility (CSR) and is promoted by politics and public (Sheehy, 2015). However, are paying taxes part of corporate social responsibility? According to Knuutinen (2014), CSR practices were for a long time dominated by environmental and social issues, but recently, the public discussion put emphasis on the responsibility of companies to pay taxes. In this paper, the relationship between CSR transparency and tax aggressiveness is examined. It seems like aggressive tax planning by multinationals executed to pay the lowest amount of tax, was invented a couple of years ago due to it starting to get extensively covered in the media. Is tax avoidance really a phenomenon that only occurs since the last decade, or are companies trying to reduce their tax liability to a minimum in the past as well? If we take a look in the history of tax planning, we see a shift from tax departments viewed by companies as being a cost center until the mid 1990’s, to being a profit center after this period (Donohoe et al., 2014). Tax planning was not an important part of the corporate strategy. The mission of the tax department was to minimize taxes while complying with the applicable laws. Donohoe et al. (2014) state that in the period until 1980, the media and government viewed companies as paying their ‘’fair share’’ of income taxes, or as they say, it is more accurate to say: the companies were not seen as not paying their fair share of income taxes. This shows that the tax planning of companies was not publicly critiqued as we see today. In the early 1990 a new view on tax planning rises where taxes should be integrated into the decision making process. During the mid 1990’s, the tax

departments shifted from being seen as a cost center to a profit center (Robinson et al., 2010). The strategy changed from cost minimization to creating shareholders value. The focus was on lowering the effective tax rate (ETR). The evaluation of the tax department’s performance was mainly based on the ETR (Clark et al., 2000). This pressured the tax departments to engage in tax avoidance. An example of this is shown at Wal-Mart: David Bullington, who is the vice president of tax policy, said in a deposition that he felled the pressure to lower the effective tax rate when the current chief financial officer, Thomas Schoewe was hired. David Bullington said: “Mr. Schoewe was familiar with very sophisticated and aggressive tax planning… And he rides herds on us all the time that we have the world’s highest tax rate of any major company” (Drucker, 2007, A1). The previous example shows the view of paying a “fair share” of taxes was not incorporated in the company’s culture at that time. According to Fisher (2014), corporate directors even think tax avoidance is mandatory; it is seen as an obligation owed to the shareholders. In the study of Freedman et al., (2007), the directors of nine big multinationals in the United Kingdom were interviewed, the results show only two of the nine directors thought taxation would be a part of CSR in the future. The overall view was that paying taxes is not a moral or a social issue, and thus not a factor of the CSR agenda. In 2004, former director of the Center for Tax Policy at the OECD, said in the financial times that “tax is where the environment was 10 years ago”. Now we are more then ten years later and there is still a long way to go, but there is made some progress. The Dutch Association of Investors for Sustainable Development (VBDO) measured in 2014 that 58% of the investigated companies viewed tax as being a part of its CSR policy compared to only 6% in 2013. Slowly, companies become aware of their social responsibility concerning taxation, however, it is still not on the level of other CSR issues. Huseynov and Klamm (2010) argue that a possible conflict among stakeholders can occur because reducing taxes might benefit shareholders, but is not in society’s best interest. The view on taxation is often paradoxical, paying tax is just seen as costs for the company, but they are also a contribution to the environment in which the company operates (Knuutinen, 2014). When a company engages in aggressive tax planning this could negatively affect society. When this is the case, the company is regarded as not paying its “fair share” of

corporate taxes. The government uses these taxes for the financing of public goods, and by avoiding taxes, companies are deemed to cause an irreversible loss to society as a whole (Lanis and Richardson, 2015). According to Porter and Kramer (2011), companies have to take the lead in bringing society and business together, and the solution lies in the principles of shared value. They state that companies can create economic value by tackling the public discussion about a “fair share” in taxes. Tax is regarded as being a shared value and thus being part of the corporate responsibility. In the line of reasoning that tax is seen as being part of CSR nowadays, not fulfilling to the corporate responsibility of paying a fair tax amount can be a wrong decision. A bad CSR image can harm a company’s reputation, and good CSR practice is considered to be a competitive advantage (Carlisle and Faulkner, 2005; Heal, 2005). Although the general opinion is that aggressive tax planning is a negative CSR issue (Hasseldine and Morris, 2013; Friese et al, 2006), some do not share this view and question if paying taxes is an elementary part of CSR (Freedman, 2004; Timonen, 2008). It is arguable that it is in best interest of the shareholder to maximize profits and minimize corporate tax, but it backfires when the company suffers reputational damage from their aggressive tax planning. That companies realize that taxation can make or break their reputation shows the research of Graham et al. (2014). In this survey, companies were asked which incentives influence the tax planning, the results show 72% of the companies rated potential reputational damage as “important” or “very important”. If we take a look back in time some directors, being interviewed in the research of freedman, (2007) suggested that tax might become part of the CSR agenda in the future but “this would happen only if the media and the public begin to focus on taxpaying and tax planning as important social issues” (pg. 40). The time has come that the society and media criticize companies about tax avoidance. In the recent issued tax risk and controversy survey by Ernst & Young (2014), 89% of respondents are somewhat or significantly worried about the attention of the media concerning the taxes companies pay or their low effective tax rates. These findings show that while companies used to be only concerned about paying the lowest amount of taxes, today the way society views them is part of the tax strategy.

Not only media and society try to get CSR on the agenda of multinationals, there is also pressure coming from groups like the VBDO, GRI and from governments. The Dutch Ministry of Economic Affairs publishes a list every year with a rating of the CSR reporting of the 500 biggest companies in the Netherlands. Concerning tax policy, the Dutch tax authorities try to establish a collaborative relationship with the big companies of the Netherlands. If the companies are open and cooperative about their tax structures, they get privileges in return. Such privileges are a priority treatment of their tax returns, fewer audits and the possibility to create an open form of communication with the tax authorities, which will benefit both parties. Dutch companies are advanced in the quality of CSR reporting (KPMG, 2011). Results from previous research are inconclusive about whether Tax is a CSR issue (Davis et. al, 2013; Lanis and Richardson, 2015; Freedman, 2004; Huseynov and Klamm, 2012; Timonen, 2008). Lanis and Richardson (2012) found a decline in tax aggressiveness when the level CSR transparency got higher. Research shows that companies are worried about reputational damage concerning taxation, and they use sustainability disclosure information to communicate their socially accountable image (Graham et al, 2014; Ernst & Young, 2014; Grey et al, 1995). Because of these two facts, this paper focuses on the relationship between tax aggressiveness and CSR reporting. This study contributes to existing literature, which have examined the relationship between CSR reporting and tax aggressiveness by using a unique dataset of the VBDO. In this dataset, the VBDO has assessed Dutch companies based on their responsible tax policy. Next to the relationship between overall CSR disclosure and tax aggressiveness, this research will specify on the level of tax transparency linked to tax aggressiveness. The following research questions will be investigated in this study: 1. Does a high level of CSR disclosure imply that a company is socially responsible on the subject of taxation? 2. Are companies that have a high level of transparency concerning their taxation less tax aggressive? 3. When a company, which was not transparent about their tax policy go to a state of disclosing a responsible tax policy, does their tax aggressiveness change because of this disclosure?

This paper is set up as follows: in the next section previous literature is discussed, followed by the development of hypotheses. In section 4 the research design is elaborated, which contains sample design and data collection. Results and findings are analyzed in section 5, followed by conclusions, limitations and recommendations for further research.

2. Theoretical framework

Corporate social responsibility The news about companies who got forced to voluntary tax payments by public pressure (the Guardian, 2012) points out that the public has influence on the behavior of the big companies in the world. It shows that companies should care about how the public perceives them. Corporate scandals in the emerging countries during the last decades have forced companies to be ethically and socially responsible (Marin et al. 2009). CSR has developed as an important item on the corporate agenda, and is getting more attention in academic research (Sen and Bhattacharya, 2001; Harrison and Freeman, 1999). Companies see the positive influence of CSR on their customers, and thereby giving it more attention and allocate more resources to CSR (Bhattacharya and Sen, 2004). CSR is defined as “actions of firms that contribute to social welfare, beyond what is required for profit maximization” (McWilliams, 2015, pg. 1). During the last decades, companies came to the realization that they have responsibilities towards the public other than delivering products or creating shareholders’ wealth. Consumers demand more than a low price and good products (Fatma et al. 2015). The benefits of CSR Companies can benefit from practicing CSR. Research has shown that a good CSR strategy can make customers identify with the company, and under the right circumstances, can even increase the product’s sales (Fatma et al., 2015, Bhattacharya and Sen, 2004). However, the results of the research that focuses on the link between CSR and customer behavior are inconsistent. Many researches see a positive linkage between CSR and consumer behavior (Mohr and Webb, 2005), but in some different cases the relationship is really weak or is nonexistent (Oeberseder et al., 2011, Cardigan and Attalla, 2001). If we

look to the responsible tax aspect of CSR, the research of Hardeck and Hertl (2014) shows that companies with a tax aggressive strategy reduce corporate success, and on the other hand, responsible tax strategy increases success. They measure success by corporate reputation and the intention of the consumer to buy. It seems that mostly the highly visible companies like retail, suffer from reputational loss caused by tax aggressiveness, because they get critiqued in the media. For example, a story about Apple evading taxes is more appealing to cover than some big company that only does business-to-business transactions. Hanlon and Slemrod (2009) show that especially retail companies have a declining stock price when news comes out that they are involved in tax shelters. Legitimacy theory A good CSR strategy is important as it can improve or harm the sales volume of a product. The trend is that the public puts greater emphasis on the social responsibility of companies. In addition, the government puts pressure on business and stimulates them to behave responsible. For a company, it is of high value to represent themselves as being a contribution to people and planet. This way of thinking is in line with the legitimacy theory. Legitimacy is the status or condition, which exists when an entity’s value system is perceived as congruent with that of society (Deegan and Unerman, 2005). Gray et al. (1995) argue that companies use the disclosure of sustainability information to communicate their socially accountable image. The companies know that the public expects them to behave in a socially responsible way, so they communicate that image to fulfill the “social contract” between the company and the society in which it operates. There have been a growing number of companies who publicly disclose about their environmental performance (Deegan and Gordon, 1996). If a company does not comply with the expectations of the community, they will bear the consequences by, for example, loss in reputation. Good implemented CSR can be really beneficial to the reputation, whereas poor CSR practices can cause big damage to the acquired reputation (Carlisle and Faulkner, 2005; Heal, 2005). A company’s reputation and legitimacy are concepts that are closely related to each other. Deephouse and Carter (2005) point out the differences between organizational legitimacy and organizational reputation. Both concepts, legitimacy and reputation, are concerned with how the society perceives the company. Reputation takes it a step further as it is creating an image beyond what is socially desirable. In addition, it creates goodwill.

Managing reputational risk Sustainability reporting is used to communicate a socially responsible image to the public. Previous research has shown that there is a debate about the function of sustainability reporting. They question if CSR reporting really improves accountability and provides useful information for the stakeholders (Dierkes and Antal, 1985). There can be different reasons why companies publish a sustainability report. Reasons can be to project their CSR image to achieve legitimacy or to improve their reputation. When a company engages in bad CSR practices, this can lead to reputational damage. This reputational harm can eventually lead to financial downfall and a declining stock price (De Villiers, 2010). Bebbington et al. (2008) claim that companies use CSR reporting to manage their reputational risk. CSR is an important aspect of their organization, as such that they want to make sure that the positive social sustainability image is being displayed to the public (Tata and Prasad, 2015). Thus, CSR reporting is a way a company can strengthen their reputation or avoid reputational loss. Impression management In the line of reasoning that CSR reporting is used to manage reputational risk lays the theory of impression management. If CSR reporting is used for boosting up their reputation and get legitimacy, it is questionable if what they claim is the truth and if they are really as socially responsible as they claim. For a company it can be of a high value to create a positive image to the outside. Morsing (2006) elaborates on a case at a Danish telecom company. The management of the telecom company had a strong commitment to CSR activities and they tried to communicate this image strongly. Morsing (2006) found that the news the telecom company published about their CSR activities was received with strong skepticism and disbelief. This example shows a deficit in publishing about CSR. CSR disclosure just represents how socially responsible the company rates itself. Previous research has been done to how companies use communication to emphasize their positive CSR image (Brammer and Pavellin, 2004; Tata and Prasad, 2015; Highhouse et al., 2009). They link this behavior to impression management. Impression management is regarded an attempt “to control and manipulate the impression conveyed to users of accounting information” (Clatworthy and Jones, 2001). The companies, which engage in impression

management, make a big effort to effectuate a positive image among the stakeholders. CSR reporting offers an opportunity to use impression management and portray a highly social responsible image. The vulnerability to impression management of CSR reporting is caused by the narrative nature of the report; it is difficult to check the underlying facts. Research has found that companies use social responsibility disclosure to hide their negative performance on CSR topics. This method is referred to as “greenwashing” (Lyon and Maxwell, 2011; Laufer, 2003). The companies that are accused of “greenwashing” put emphasis on their good performance and do not mention the aspects of social responsibility in which they fail. Investors can be skeptical about the reported CSR, this causes an increasing demand for independent assurance on the CSR report as a signal of disclosure credibility (Brown-Liburd and Zamora, 2015). Tax aggressiveness Corporate social responsibility is more than being good for people and planet, paying a fair share of tax is becoming an important part of CSR. There can be a debate about what is seen as this fair share and about when a company is considered to be tax aggressive. There is no universal definition of tax aggressiveness. Frank et al. (2009) define aggressive tax planning as “downward manipulation of taxable income through tax planning that may or may not be considered fraudulent tax evasion” (pg. 468). Most current literature agrees tax avoidance is considered as aggressive tax planning, but tax avoidance is an ambiguous term. The OECD defines tax avoidance as the planning of a company’s affairs that is deliberately intended to lower the tax liability. This arrangement could be totally legal but is often seen as using the gaps in the law, whereas the term tax evasion is used for illegal affairs to lower the tax liability. Tax evasion is the illegal form of tax avoidance and is obviously not seen as socially responsible. In this research, taxation is viewed in the context of CSR. From the CSR point of view tax aggressiveness is defined as actions taken by companies, which are compliant with the applicable law, but do not comply to what people consider to be reasonable. If a company has an aggressive tax planning strategy, these actions could have a negative effect on society. The tax aggressive company is considered by the public as not to be paying its fair share of taxes (Lanis and Richardson, 2015). Activities that are labeled as being tax aggressive are, for example, the use of foreign tax havens, an unbalanced capital structure

and transfer pricing. According to Knuutinen (2014), tax avoidance operations are most of the times artificial, and not based on pragmatism. There are other factors that lower the effective tax rate but are not considered to be tax aggressive, for instance, carry forward/back and different tax reliefs that are offered by tax authorities. Not every measure that lowers the tax liability is considered being part of aggressive tax planning, making it hard to draw a line where tax planning becomes aggressive. For example, transfer pricing can be misused to lower the tax liability but it does not necessarily mean a company is involved in tax avoidance. It is difficult for society to estimate if the transfer pricing policy is used to avoid taxation. Tax authorities have to make a judgment about the transfer pricing policies. A company should disclose their transfer pricing policy to obtain transparency. Ostas (2004) explains the problem with CSR and the compliance with the law as the difference between a companies’ social and legal duty. A company can comply with the letter of the law but at the same time cannot cooperate with the spirit of the law. Where the spirit of the law represents the morality. Aggressive tax planning may be legal but it is immoral; it is not conforming to what is accepted as being reasonable.

3. Hypotheses development

The literature proves that tax avoidance is considered to be socially irresponsible and that an aggressive tax strategy is associated with negative CSR (Hasseldine and Morris, 2013; Friese et al., 2006). Christensen and Murphy (2004) state that companies need to realize that aggressive tax strategies are not in line with long-term sustainability. There are some researchers who have a different opinion about responsible tax being included in CSR. Freedman (2004) claims tax avoidance is not an explicit part of CSR and legislation should make clear rules about tax policies. Timonen (2008) thinks paying tax is not part of CSR and companies do not see taxation as a CSR issue. The pressure for CSR disclosure does not only come from the public or the customers but also legislation pressures companies to put CSR on their agenda. It does not have to be

written in the law that they have to report about CSR but they can encourage CSR reporting in different ways. A good example is shown in the Netherlands where the CSR reporting performance of companies gets reviewed and the results are published. The Dutch government puts a list together, annually, with a rating of how transparent the CSR reports are of the 485 biggest companies in the Netherlands. The transparency benchmark does not measure the performance on CSR; it merely reviews the CSR reporting. De Waard (2014), who researched sustainability reporting and is involved in the assessment of the transparency benchmark, reports two trends. The first trend is about the reason why companies are getting competitive in the benchmark. The companies have no influence if they are included in the benchmark, so if they have no choice they at least want to score higher than the competition. The second trend is about the level of truth. Between a lie and the truth is a grey area. A company can present themselves in the report as a really sustainable company but do not act on it, or a highly sustainable company does not report about their social responsibility performance at all. Another aspect of sustainability reports de Waard (2014) points out, is that companies who are involved in social irresponsible activities might cover this up with an overload of future oriented information. The overflow of information in a CSR report can hinder the user to make a correct judgment. This is similar to what is described as “greenwashing”, where selective disclosure of positive information in CSR reporting takes place to create an overly positive image and hide bad CSR performance (Lyon and Maxwell, 2011; Laufer, 2003). It is questionable if CSR disclosure is a good measurement of CSR performance. A company can pretend to be really socially responsible to influence the public but at the same time do not act on it. Sikka (2010) and Preuss (2010) argue that there are companies that claim to be socially responsible but in the meantime are engaged in tax avoidance. Lanis and Richardson (2012) show that the level of tax aggressiveness of a company declines if the level of CSR disclosure rises. Balakrishnan et al. (2012) suggest that firms are dealing with a trade-off between transparency and aggressive tax planning. They find that aggressive tax planning decreases corporate transparency, but also find evidence that tax aggressive firms try to conceal this lack of transparency by increasing the volume of disclosure about tax. Findings of Hoi et al (2013) show that companies with irresponsible CSR activities are more likely to be involved in tax avoidance.

The literature is inconclusive about whether CSR and CSR disclosure is related to tax aggressiveness, and some companies state to be responsible but do not act on it. Although there are mixed views on tax aggressiveness being a CSR issue, the level of CSR disclosure seems to be related to tax aggressiveness. Firms who are highly tax aggressive are expected to be less transparent. Companies who score high on CSR disclosure care about their reputation and want to spread the message that they are a good corporate citizen. Hence, the arguments above lead to the following hypothesis: H1: The higher a firm scores on the transparency benchmark, the lower their tax aggressiveness. The Dutch Association of Investors for Sustainable Development (VBDO) works to create a sustainable capital market, a market that considers besides financial criteria also non-financial criteria like social and environmental issues. One of the things VBDO does to create a sustainable capital market is compose a Tax Transparency benchmark (VBDO, 2015). Where 64 Dutch listed multinational companies are ranked on the transparency that they provide into their responsible tax policy. The relationship between CSR transparency and tax aggressiveness is discussed in the first hypotheses. Not every company sees taxation as part of CSR. If they do not consider taxation as part of their CSR, they can score high on the transparency benchmark, but at same time be tax aggressive. The companies that report about their responsible tax policy do recognize that taxation is part of CSR. Therefore, the relationship between being tax transparent and tax aggressiveness is stronger than the relation between CSR transparency and tax aggressiveness. A company that is transparent about taxation acknowledges that a responsible tax policy is crucial, and they will report about this. The view that managers and other stakeholders do not see taxation as an important feature of CSR (Davis et al., 2013) is not applicable on the companies who score high on tax transparency. Companies engaging in aggressive tax planning show a declining financial report transparency (Balakrishnan et al., 2012). If a company is transparent about their tax policy they will probably not have an aggressive tax planning policy in place. Having an aggressive tax planning strategy will not be disclosed in the (CSR) report. Therefore, I suspect a strong relationship between the score on tax transparency and the tax aggressiveness of a company. This results in the following hypothesis:

H2: The higher a firm scores on the tax transparency benchmark, the lower their tax aggressiveness. The goal of VBDO is to create sustainability awareness among companies and investors. To accomplish this goal the VBDO makes a sustainability performance index of companies where they assess the CSR performance by reading the sustainability report and publish the results in the report: Sustainability Performance of Dutch Stock Listed Companies (VBDO, 2014; VBDO 2015). They also go to the annual general meetings of the companies who have been evaluated and ask questions about their CSR policy. If there is a CSR subject that is not reported or not comprehensively reported they will highlight that in their questions. One of the criteria they judge is a responsible tax policy. The VBDO recommends companies to define and communicate a clear strategy on tax governance, align tax with the business and tax is not a profit center by itself. The VBDO measures an increase of companies who have a responsible tax policy in place from 16% to 45% in reporting year 2013 to 2014. This increase is probably caused by the VBDO who have put disclosure of a responsible tax policy on the agenda of the companies. The tax aggressiveness of the companies who put an effective tax policy in place is expected to decline because the awareness of taxation being part of CSR can cause a company to become less tax aggressive. Research shows that some companies claim to be socially responsible but do not act on it (Sikka, 2010; Preuss, 2010). Did the companies actually change their tax strategy or do they just report about it now and do not act on it? On the basis of the above, I developed the following hypothesis: H3: If a company reports having a responsible tax policy in place, then the level of tax aggressiveness decreases.

4. Research Design

This research seeks to provide more information on the relationship between CSR disclosure and tax aggressiveness, and is concentrated on companies in the Netherlands. It is focused on Dutch companies for several reasons. First of all, there is a lot of data available about CSR

reporting of Dutch companies. Globally, sustainability reporting is becoming a common part of corporate reporting, and the Netherlands is in the top ranking of sustainability reporters worldwide (KPMG, 2008). In the Netherlands, big companies (with more than 250 employees, this are more than 3000 companies) are obligated to report on sustainability and have to follow certain written guidelines. Besides reporting on sustainability being mandatory, organizations like the VBDO play a big role in the development of CSR reporting. In addition, the annual presented transparency benchmark by the Dutch Ministry of Economic Affairs, where the CSR reporting gets assessed and a prize gets awarded to the most CSR transparent company, plays a role in the level of CSR disclosure in Dutch companies. 4.1. Sample design and data collection For empirical testing, this study uses the data of 70 companies which were selected by the VBDO. The VBDO based the selection of these companies on their listing in the Netherlands (AEX, AMX, AScX), and/or companies they regarded as necessary to investigate based on sustainability performance related issues in the past. The companies are active in a variety of industries. The number of 70 companies was downsized to 63 due to a lack of financial and/or CSR transparency information. Information about these companies was collected of the years 2012, 2013 and 2014. The financial data was collected from the ORBIS database. Data that was not available in ORBIS was hand collected from the corporate annual reports. To calculate the ETR, the items total tax expense and profit before tax of the years 2012 to 2014 were used. The transparency benchmark scores were gathered from the tax transparency score archive which is online available at the website of the Dutch Ministry of Economic Affairs. The scores on tax transparency are collected from the VBDO Tax Transparency Benchmark 2015 report. 2015 was the first year the VBDO assessed the tax transparency of Dutch companies, so it is only possible to link tax aggressiveness to tax transparency for this year. The information about a company having a responsible tax policy in place was hand collected from the VBDO reports: Sustainability Performance of Dutch Stock Listed Companies 2014, 2015. The VBDO judged based on the annual reports and by asking questions at the annual meeting if there is a responsible tax policy in place. The age of the companies used for the control variables was hand collected from the websites of the

companies. The scores of VBDO tax transparency and the transparency benchmark are based on the transparency performance in the previous year, thus the ETR of 2014 is linked to the tax transparency score in 2015. 4.2. Dependent variable To measure tax aggressiveness, the firm’s effective tax rate (ETR) is used. This measurement is widely adopted in previous tax aggressiveness research (Higgins et al. 2015; De Waegenaere et al. 2015; Hanlon and Heitzman, 2010). Following Dyreng et al. (2008), I define ETR as book tax expense divided by profit before taxation. For the calculation of the ETR, book tax expense or cash tax expense can be used. There are differences between book tax expense and cash tax paid, this is caused by a difference in taxable income and book income. The difference will eventually even out over a longer period of time. To measure tax aggressiveness, I will use book-ETR because it is less volatile than cash-ETR, and it is not affected by tax deferral strategies (Hanlon and Heitzman, 2010). Tax aggressiveness is defined as non-conforming avoidance, and deferred tax activities are regarded as conforming avoidance. In some previous research the long-run ETR is calculated, this is done to even out the volatility in ETR for example caused by accrual management (Dyreng et al. 2010; Balaknishan et al., 2012; De Waegenaere et al. 2015). Following Higgins et al. (2015) the long-run ETR is not used in this research. Averaging ETR will contribute to the robustness of the test. However, in this research, the difference in tax aggressiveness between different years is measured therefore long-run ETR is not suitable making the ETR being calculated over a one-year period. Book ETR is a much-used method of calculating ETR (Huseynov and Klamm, 2012). The difference in ETR score of a company will be compared to (tax) transparency scores over several years. The ETR in this research is measured using the total ‘tax expense’ and ‘profit before taxation’ obtained from ORBIS. 𝐸𝑇𝑅 = 𝑡𝑜𝑡𝑎𝑙 𝑡𝑎𝑥 𝑒𝑥𝑝𝑒𝑛𝑠𝑒 𝑝𝑟𝑜𝑓𝑖𝑡 𝑏𝑒𝑓𝑜𝑟𝑒 𝑡𝑎𝑥𝑎𝑡𝑖𝑜𝑛

4.3. Independent variables Transparency Benchmark score Annually, the Dutch Ministry of Economic Affairs issues the Dutch Transparency benchmark report. The company who has the highest score on the transparency benchmark is rewarded with a prize. The winning CSR report is considered to be the highest quality sustainability report of the Netherlands. The performance on sustainability disclosure is judged on premeditated criteria. The ranking is done by self-assessment and an audit firm checks this self-assessment. Currently, this auditing is done by EY. Points are rewarded in different categories and the maximum score a company can achieve is 200 points. For example, in 2015 Akzo Nobel won the award for having the best sustainability report by scoring a total of 196 points. The transparency benchmark scores are collected from the years 2013, 2014 and 2015. The scores show a downfall between 2013 and 2014 because the Dutch Ministry of Economic Affairs changed the assessment criteria drastically to comply with the guidelines of the Global Reporting Initiative (GRI). The scores are based on the sustainability reports of the previous year, as such the score on the transparency benchmark 2015 is based on the CSR disclosure in 2014. The score on the transparency benchmark is linked to the ETR of one year before. Tax transparency score The tax transparency score is obtained from the VBDO Tax Transparency Benchmark 2015 report. 2015 is the first year this report is issued by the VBDO thus the data is limited. In the report, the tax transparency of 2014 is assessed, therefore this score is linked to the ETR in 2014. The tax transparency is judged by the VBDO based on the annual reports and other publicly available documents. A total of 64 companies are judged on 32 criteria with a maximum score of 36 points. Unilever was in first place of the 2015 tax transparency benchmark with a total of 22 points. Examples of indicators that the VBDO assessed were: if the companies provide a detailed reconciliation of ETR to statutory tax rate and a country-by-country report of the corporate income taxes. Unfortunately, the data is limited to the year of 2015 for this research.

Responsible tax policy To measure if a company has a responsible tax policy in place, data is collected from the VBDO reports: sustainability Performance of Dutch Stock Listed Companies in 2014 and 2015 is used. In this reports the VBDO judges the social responsibility of 64 companies in different categories. For this research the category of responsible taxation is taken from the reports. The VBDO has assessed if a company has responsible taxation principles and/or a responsible taxation policy. This assessment is based on the annual reports and the VBDO asks questions about responsible taxation at the annual general meeting. The responsible tax policy is a dummy variable. It takes the value 0 or 1 for respectively not having a responsible tax policy in place and having a responsible tax policy in place. 4.4. Control variables The control variables are selected based on previous studies of tax aggressiveness. Table 1 shows an overview of the dependent, independent and control variables. Firm size The first control variable is “firm size”. The size of the firm is expected to have a positive relationship with tax aggressiveness. Big companies have more opportunities compared to smaller companies to reduce their tax liability (Lanis and Richardson, 2013; Balakrishnan et al. 2012). Findings from Hung Chan et al. (2013) show that small companies pay proportionately more taxes than larger companies. Frank et al. (2009) show a positive relation between size and tax aggressiveness. In line with previous research, size is measured by the natural log of total assets (Lanis and Richardson, 2013; Dyreng et al., 2010; Frank et al., 2009). Firm age The second control variable is “firm age”. This data is collected from the websites of the companies. The variable represents historical age; when the company was first founded. The variable age is often used as a control variable in previous research related to tax aggressiveness, as it could have a relationship with tax aggressiveness (Balaknishan et al.,

2012; Higgins et al. 2015; Lanis and Richardson, 2013). It is expected that older companies have a consistent way of doing business and do not engage in tax aggressive planning. Royal The third control variable is whether or not a company is “royal’’. In the Netherlands a company can obtain the title ‘’royal’’ (Dutch: koninklijk). The most known company to have this title is the Royal Dutch Shell. To be awarded royal a company has to be of important value in their field of work and have a status of national importance. Other criteria are that they have to be financially healthy and have a flawless reputation. Companies can use the title Koninklijk (royal) in their business name and receive a certificate. When they have received the status royal, they are obligated to maintain an immaculate reputation. Tax aggressive behavior does not fit to an excellent reputation and is not a contribution to society. Therefore it is expected that a company who carries the title ‘’royal’’ is less tax aggressive. The variable royal is added as a dummy variable. Leverage Following previous research leverage is added (Lanis and Richardson, 2013; Balakrishnen et al., 2012). Previous research has shown that leverage has a positive influence on tax aggressiveness (dyreng et al., 2008; Frank et al., 2008). Leverage ratio is calculated as long-term debt divided by total assets.

Table 1: Measurement of dependent and independent variables

Variable Proxy Measurement

Dependent variable

ETR Tax aggressiveness Tax expense/Profit before tax

Independent variables

TBscore Transparency benchmark score Ordinal variable ranging from 0 to 200

TAXscore Tax transparency benchmark score Ordinal variable ranging from 0 to 36

RTP Having a responsible tax policy in place Dummy variable equal to 1 if company has a responsible tax policy in place, 0 otherwise

Control variables

Size Firm size Natural logarithm of total assets

Age Historical foundation date of the firm Continuous numeric variable

Royal Awarded the title ‘Koninklijk’ Dummy variable equal to 1 if company is labeled as royal, 0 otherwise

Leverage Leverage Total long-term debt/total assets 4.5. Model To test if the independent variables have influence on tax aggressiveness, a linear regression analyses was executed. The following model was specified:

Tax Aggressivenesst = β + β1 TBscoret + β2 TAXscoret + β3 RTPt + β4 Size + β5 Age + β5 Royal

+ β6 Leverage + ε

βi = the coefficients, εi = the error term and t indicates years. Definition of variables can be found in Table 1.

5. Results

In this section, the results of the empirical testing is presented. The first paragraph contains the descriptive statistics followed by a paragraph on model correlation. The third paragraph presents the results of the regression analyses. 5.1 Descriptive statistics The descriptive statistics are presented in table 2, which shows the size of the sample (N), the minimum and maximum score, the mean and standard deviation. Following Dyreng et al. (2008) the value of ETR is winsorized at 0 and 1, to minimize the effect of outliers. There are 63 companies in the sample of which data is collected over the years 2012, 2013 and 2014 (a total of 189 firm year observations). The average effective tax rate is 22.08%. The standard deviation of the ETR score is relatively high (0.1384) meaning that the companies in the sample show large variety in ETR scores. The average Transparency Benchmark score is 124.64 with a standard deviation of 50.209. The maximum is 198, and the minimum 0, thereby showing a fairly normal distribution. The sample size for the tax transparency score is 63, since this information is only available for one year. The tax transparency score shows a mean of 9.06 with a maximum of 22. Given the maximum score one can obtain of 36 on tax transparency, this result shows companies are not very transparent about their tax policy. Table 2: Descriptive statistics

Variable N Min Max Mean Std. dev.

Dependent variable ETR 189 .0 .75 .2208 .1384 Independent variables TBscore 189 0 198 124.64 50.209 TAXscore 63 1 22 9.06 6.029 RTP 126 0 1 .32 .467 Control variables Size 189 10.86 20.79 15.32 2.129 Age 189 1616 2000 1900.44 79.414 Royal 189 0 1 .17 .381 Leverage 189 .0 0.5487 0.146 0.1267

23 Results show that 32% of the sample of 126 has disclosed about having a responsible tax policy. This sample is 126 because this information is only available for two years. When we look at the results per year, we see that 17% has a responsible tax policy in place in 2013 against 46% in 2014. This shows an increase of 29% of companies who disclose about their responsible tax policy. Because of the natural log (LN) transformation the impact of skewed distribution is reduced of the variable “Size”. Size has a mean of 15.32 and standard deviation of 2.129. The variable “Age” has a mean of 1900.44 and st. dev. of 79.414. The oldest company in the sample was founded in 1616; the newest in 2000. Furthermore, the results show that 17% of the companies have the title ‘Royal’. Leverage shows a mean of 0.146 with a standard deviation of 0.1267. 5.2 Correlation analysis Before making the regression analyses, a correlation analysis was performed on the variables. When the correlation coefficient is below -0.7, or above 0.7, then multicollinearity can be an issue and the model needs to be adjusted. Table 3 presents the Pearson correlations matrix. The analysis shows there is no multicollinearity and the regression analysis can be executed. The transparency benchmark score is significant and positively correlated to ETR which supports the expectations that a company which has a high score on the transparency benchmark is less tax aggressive, and thus has a higher ETR. However, the correlation coefficient for ETR and tax transparency score is not significant so it does not support a relationship between ETR and tax transparency score. In addition, it show that Royal is positively and significant correlated to ETR. A more precise measure for multicollinearity is the variance inflation factor (VIF). Multicollinearity is probably an issue when the VIF score is higher than +/- 10. The highest VIF scores of the models are presented in table 4. The VIF scores do not exceed the value of 1.653, this indicates that multicollinearity will not be a problem.

5.3 Multivariate analysis A linear regression analysis is performed on the data. In the first model, only the control variables and de dependent variable are included. The transparency benchmark score is added to the second model. In the third model, the “tax transparency” variable is added without the transparency benchmark variable to test the second hypotheses. In model 4, the “TBscore” and the “TAXscore” variables are both added. The variable “RTP”, which represents if the company has a responsible tax policy in place, is added to model 5. In table 4 the results of the regression analyses are presented. The first model shows the relationship between the control variables and the dependent variable (tax aggressiveness). The results show that the control variable “Royal” has a positive and significant influence on ETR (b=0.099; p<0.01). This indicates that as expected that companies who are entitled as being royal have a higher ETR, and thus are considered to be less tax aggressive. The other control variables show no significant results, therefore these variables have no significant influence on tax aggressiveness. Table 3: Correlation Matrix Table 3: Correlation matrix Variable 1 2 3 4 5 6 7 8 1. ETR 1 2. TBscore 0.191** ₁ 3. TAXscore 0.204 0.484** ₁ 4. RTP 0.112 0.422** _0.691** ₁ 5. Size 0.042 0.356** _0.542** _0.332** ₁ 6. Age -0.26 -0.400** _{-0.186 -0.200}* _-0.224** ₁ 7. Royal 0.241** _0.424** _0.254** _{.091 0.228}** _-0.390** ₁ 8. Leverage 0.102 0.223 0.194 0.334 0.366** _{0.268 0.012 1} **. Correlation is significant at the 0.01 level (2-tailed). *. Correlation is significant at the 0.05 level (2-tailed).

In model 2, the independent variable “TBscore” is added to test the first hypotheses. The adjusted R2 is higher than the first model (model 2: 0.06; model 1: 0.048). This indicates the model is more explanatory. In addition, the F value suggests the model is significant (F = 4.017; p<0.01). The results provide evidence of a significant positive relationship between TBscore and ETR (b=0.001; p<0.10). This implicates that if a company scores one extra point on the transparency benchmark, the ETR of this company will increase with 0.001. ETR is used as a proxy for tax aggressiveness; this result shows a company that scores on the transparency benchmark is less tax aggressive. This test provides supportive evidence for the first hypotheses. Concluding, H1: The higher a firm scores on the transparency benchmark, the lower their tax aggressiveness can be accepted. The third model tests the second hypotheses, “the higher a firm scores on the tax transparency benchmark, the lower their tax aggressiveness”. The regression analysis’ results provide no supportive evidence for this hypothesis. The model appears to be not significant. The relationship between TAXscore and ETR is positive but not significant. In addition, the control variable “royal” shows no significant coefficient in this model. Model number 4 runs both independent variables “TBscore” and “TAXscore” at the same time, there is again no significant relationship between TAXscore and ETR. In this model the relationship between TBscore and ETR is diminished and is not significant anymore. This might be caused because the population in the tests with TAXscore is too small. To test the third hypotheses the variable “RTP” is added to model 5. To measure only the influence of the RTP variable and to make the sample bigger, the variable “TAXscore” is left out in this model. This model appears to be significant (F = 3.209; p<0.01). The relationship between TBscore and ETR shows a significant positive coefficient (b=0.001; p<0.10). There is no significant relationship between the RTP variable and ETR. This suggests that there is no connection between tax aggressiveness and the classification of having a responsible tax policy in place. When the variable “TAXscore” is added to the test, the sample size narrows to 63, and then there is no significant relationship noticeable in the model. In conclusion, the third hypotheses: If a company reports having a responsible tax policy in place, then the level of tax aggressiveness decreases can be rejected.

6. Discussion and conclusion

The debate on taxation being part of a company’s socially responsible image (Hasseldine and Morris, 2013; Friese et al, 2006; Freedman, 2004; Timonen, 2008; Knuutinen, 2014) and the fact that managers take reputational damage caused by tax planning into account when making decisions (Graham et al, 2014; Ernst & Young, 2014), suggest that a company wants to carry out a socially responsible image. This image is often portrayed in the company’s CSR report (Brammer and Pavellin, 2004). A company who values CSR and CSR disclosure is expected to view aggressive tax planning as not socially responsible. This research empirically investigates the relationship between CSR disclosure and tax aggressiveness. The specific part of CSR disclosure about taxation is being highlighted in this study by using data about tax transparency. The sample consists of 63 companies from the Netherlands of which financial, CSR transparency and tax transparency information is obtained. Table 4: Multiple regression analyses (dependent variable: tax aggressiveness)

Variable Model 1 Model 2 Model 3 Model 4 Model 5

TBscore _0.001* _{0.000 0.001}* TAXscore 0.003 0.001 RTP 0.018 Size 0.000 -0.003 -0.001 -0.002 -0.003 Age 0.000 0.000 0.000 0.000 0.000 Royal 0.099*** _0.084*** _{0.053 0.037 0.085}*** Leverage 0.173 0.065 0.044 0.105 0.073 Observations 189 189 63 63 189 Adjusted R2 0.048 0.060 0.021 0.038 0.055 F value 4.193*** _4.017*** _{1.326 1.490 3.209}*** Highest VIF 1.208 1.428 1.455 1.653 1.621 ***. Correlation is significant at the 0.01 level (2-tailed). **. Correlation is significant at the 0.05 level (2-tailed). *. Correlation is significant at the 0.10 level (2-tailed).

The first hypotheses tried to verify a relation between overall CSR transparency and tax aggressiveness. The empirical test shows a positive relationship between the score a company achieves on the transparency benchmark and the tax aggressiveness. The tax aggressiveness declines when the quality of a company’s CSR report gets better. These findings follow the results from Lanis and Richardson (2013) who also find decreasing tax aggressiveness when the CSR disclosure is more transparent. The acceptance of the first hypotheses shows that companies who consider CSR to be an important subject, also sees paying their “fair share” of tax as being their social responsibility. This conclusion is consistent with the view of previous literature about responsible tax planning being a part of CSR (Knuutinen, 2014; Huseynov and Klamm, 2010). The statement that managers do not see taxation as an important feature of CSR is not does not apply (Davis et al, 2013; Timonen, 2008) The second hypotheses aimed to verify the relationship between tax transparency and tax aggressiveness. Results of the empirical tests show no evidence of this relationship. In contrast to what was expected, a high score on the transparency benchmark did not imply the higher effective tax rate. In contrary to the relationship between CSR transparency and tax aggressiveness, there is no significant relationship between tax transparency and tax aggressiveness. This is a notable result because tax transparency is a part of CSR disclosure that specifies on tax planning. The rejection of the third hypotheses follows the results from the second hypotheses. A company that reports to have a responsible tax policy in place appears to have no significant relation to tax aggressiveness. The expectation was that disclosure about responsible tax planning would indicate that the company is less tax aggressive, but this is not supported by empirical evidence. There are no negative relations found either, so the results of Preus (2010) that, companies claim that they are socially responsible but still are engaged in tax avoidance is not applicable here. These findings could be related to the effect of “greenwashing”, a concept of using CSR reporting covering up performance on CSR topic (Lyon and Maxwell, 2011; Laufer, 2003). Tax avoidance is a big topic in the news nowadays, thus companies may respond by reporting about having a responsible tax policy to cover themselves. With mentioning their tax policy they can avoid possible reputational cost in the future. It does not need to be the case that they engage in

tax avoidance but it can be seen as on obligatory subject to report about because it gets promoted by organizations like the VBDO. A notable result from the regression analyses show there is a positive significant relationship between tax aggressiveness and when a company is entitled royal. This is according to what is expected, a company is rewarded with the royal title when they deliver a contribution to society and have a flawless reputation. The results show this contribution to society is also applicable on paying a “fair share” of corporate tax. In conclusion, this study has shown that when a company scores higher on CSR transparency score the tax aggressiveness declines. This finding is consistent with previous research conducted by Lanis and Richardson (2012). This indicates that socially responsible companies are less tax aggressive, which is in line with Hoi et al. (2013), who found that CSR irresponsible companies are more likely to be involved in tax avoidance. Further it failed to prove a relationship between tax transparency and tax aggressiveness. It showed no significant relationship between reporting about having a responsible tax policy in place and tax aggressiveness. Limitations The limitations of this study are as follows. The lack of finding significant evidence for the second and third hypotheses may be because of the small sample size. Due to the reliance on the data about tax transparency provided by the VBDO, and the elimination of incomplete company data, caused a limited sample size. This could lead to limited statistical evidence. Secondly, although in current literature a variety of ETR calculations are often used as a proxy for measuring tax aggressiveness, no ideal measure of tax aggressiveness is developed yet. ETR is missing the ability to eliminate the influences that lower the ETR but are not labeled as being tax aggressive. The choice for ETR is often made because the data is easy to obtain but it unfortunately fails to take into account tax facilities, which are not considered to be tax aggressive. For example, in the Netherlands are some tax facilities in place, used to stimulate innovative and environmental friendly investments by companies. These facilities

lower the tax expense but are not counted as being tax aggressive. ETR also lacks a comparison to a “normal” tax rate, for instance it is difficult to compare companies who operate international to companies that only operate on a national level. The international companies with the subsidiaries abroad will have more opportunities to take advantage of different tax facilities. In conclusion, there are some limitations to using ETR as a proxy for tax aggressiveness because it can be influenced by a variety of factors that might not be considered as aggressive tax planning. To measure the precise level of tax aggressiveness a thorough investigation of corporate tax planning is needed. Further research Further research can be expanded to include actual CSR performance instead of CSR transparency. An example of a research where they used real word measures of CSR performance is the study of Lanis and Richardson (2015), where they used data about CSR performance from the Kinder, Lydenberg, and Domini database. It would be interesting to see if in the future more data is gathered about the tax transparency score, a similar test can be executed with a bigger sample size. In addition, measuring differences between industries may be considered. It is expected that companies with a high visibility, like retail, suffer the biggest reputational damage from tax avoidance (Hanlon and Slemrod, 2009). By using a more accurate proxy of tax avoidance we might be able to gain a better insight into the relationship between CSR and tax aggressiveness. Another remarkable result from this research was the positive relationship between tax aggressiveness and the “royal” title of the company. In this study this was merely a control variable, but it might be interesting to do some further research about this relationship.

References ActionAid. (2011). Tax responsibility: The business case for making tax a corporate responsibility issue . Available at https://www.actionaid.org.uk/sites/default/files/doc_lib/tax_responsibility.pdf Balakrishnan, K., Blouin, J., & Guay, W. (2012). Does tax aggressiveness reduce corporate transparency? Working paper BBC (2012). http://www.bbc.com/news/business-20197710. Available at: http://www.bbc.com/news/business-20197710 Bebbington, J., Larrinaga-Gonzalez, C., Moneva, J.M. (2008). Corporate social responsibility and reputation risk management. Accounting, Auditing and Accountability Journal, 21(3), 337-362 Bhattacharya, C.B., Sen, S. (2004). Doing Better at Doing Good: when, why, and how consumers respond to corporate social initiatives. California Management Review, 47, 9-24 Brammer, S., Pavellin, S. (2004). Voluntary social disclosures by large UK companies. Business Ethics: A European Review, 13(2/ 3), 86-99 Brown-Liburd, H., Zamora, V.L. (2015). The Role of Corporate Social Responsibility (CSR) Assurance in Investors' Judgments When Managerial Pay is Explicitly Tied to CSR Performance. Auditing: A Journal of Practice & Theory, 34(1), 75-96 Calabrese, A., Costa, R., Menichini, T., Rosati, F. (2013). Does corporate social responsibility hit the mark? A stakeholder oriented methodology for CSR assessment. Knowledge &Process Management, 20(2), 77-89 Cardigan, M., Attalla, A. (2001). The myth of the ethical consumer - does ethics matter in purchase behavior? Journal of Marketing 18(7), 560-578 Carlisle, Y.M., Faulkner, D.O. (2005). The strategy of reputation. Strategic Change, 14(8), 413-422 Christensen, J., Murphy, R. (2004). The social irresponsibility of corporate tax avoidance: Taking CSR to the bottom line. Development, 47, 37-44 Clatworthy, M., Jones, M.J. (2001). The effect of thematic structure on the variability of annual report readability. Accounting, Auditing and Accountability Journal, 14(3), 311-326 Davis, A.K., Guenther, D.A., Krull, L.K., Williams, B.M. (2013). Taxes and corporate accountability reporting: Is paying taxes viewed as socially responsible? Working Paper, Lundquist College of Business, University of Oregon.

Deegan, C., Gordon, B. (1996). A study of the environ- mental disclosure practices of Australian corporation. Accounting and Business Research, 26(3), 187-199 Deegan, G., Unerman, J. (2005). Financial Accounting Theory, 1-10 Deephouse, D.L., Carter, S.M. (2005). An examination of differences between organizational legitimacy and organizational reputation. Journal of Management Studies, 42(2), 329-360 De Villiers, M. (2010). Quantitative proof of reputational harm. Fordham Journal of Corporate & Financial Law, 15(3), 567-615 De Waard, D.A. (2014). De bomen en het bos. Available at http://www.slideshare.net/DickdeWaard/oratie-dick-de-waard-uoc-16okt2014-49408867?ref=https://www.linkedin.com/ De Waegenaere, A., Sansing, R. C., Wielhouwer, J. (2015). Financial accounting measures of tax aggressiveness: Contracting and Measurement. Contemporary Accounting Research, 32 (1), 223-242 Dierkes, M., Antal, A.B. (1985). The usefulness and use of social reporting information. Accounting, Organizations and Society, 10(1), 29-34 Donohoe, M.P., McGill, G.A., Outslay, E. (2014). Risky Business: The Prosopography of Corporate Tax Planning. National Tax Journal, 67(4), 851-874 Dyreng, S.D., Hanlon, M., Maydew, E.L. (2008). Long-Run Corporate Tax Avoidance. The Accounting Review, 81 (1), 61-82 Dyreng, S.D, Hanlon, M., Maydew, E. L. (2010). The effects of executives on corporate tax avoidance. The Accounting Review 85 (4), 1163-89 Drucker, J. (2007). Inside Wal-Mart’s bid to slash state taxes; Ernst & Young devises complex strategies; California pushes back. Wall Street Journal, October 23 Ernst & Young. (2014). Bridging the Divide: Highlightsfrom the 2014 Tax Risk and Controversy Survey. Available at: http://www.ey.com/Publication/vwLUAssets/EY-2014-tax- risk-and-controversy-survey-highlights/$FILE/EY-2014-tax-risk-and-controversy-survey-highlights.pdf Fatma, M., Rahman, Z., Kahn, I. (2015). The role of CSR as a determinant of consumer responses in financial sector. Decision, 42(4), 393-401 Fatma, M., Rahman, Z. (2015). Consumer perspective on CSR literature review and future research agenda. Management Research Review, 38(2), 195-216 Fisher, J. (2014). Fair Shores: Tax Havens, Tax avoidance, and Corporate Social Responsibility. Boston University Law Review, 94(1), 337-365

Frank, M.M., Lynch, L., Rego, S. (2009). Tax reporting aggressiveness and its relation to aggressive financial reporting. The Accounting Review, 84, 467-496 Freedman, J. (2004). Defining taxpayer responsibility: In support of a general anti-avoidance principle. British Tax Review, 4(4), 332-357 Freedman, J., Loomer, G., Vella, J. (2007). Moving beyond avoidance? Tax risk and the relationship between large business and HMRC. Oxford Centre for Business Taxation, June 2007 Friedman, M. (1970) The Social Responsibility of Business is to Increase its Profits. The New York Times Magazine, 13 September 1970 Friese, A., Link, S., Mayer, S. (2006). Taxation and corporate governance - State of the art. In W. Scho ̈n (Ed.). Tax and corporate governance, 19 January 2006 Graham, J.R., Hanlon, M., Shevlin, T., Shroff, N. (2014). “Incentives for Tax Planning and Avoidance: Evidence from the Field.” The Accounting Review, 89(3), 991-1023 Gray, R., Kouhy, R., Lavers, S. (1995). Corporate social and environmental reporting: A review of the literature and a longitudinal study of UK disclosure. Accounting, Auditing and Accountability, 8(2), 47-77 Hanlon, M., Heitzman, S. (2010). A review of tax research. Journal of Accounting and Economics, 50 (2–3), 127-78 Hanlon, M., Slemrod, J. (2009). What does tax aggressiveness signal? Evidence from stock price reactions to news about tax shelter involvement. Journal of Public Economics, 93 (1-2), 126-41 Hardeck, I., Hertl, R. (2014). Consumer Reactions To Corporate Tax Strategies: Effects on Corporate Reputation and Purchasing Behavior. Journal of Business Ethics, 123, 309-326 Harrison, J.S. and Freeman, M. (1999). ‘Stakeholders, Social Responsibility, and Performance: Empirical evidence and theoretical perspectives’, Academy of management Journal, 42(5), 479-485 Hasseldine, J., Morris, G. (2013). Corporate social responsibility and tax avoidance: A comment and reflection. Accounting forum, 37(1), 1-14 Heal, G. (2005). Corporate Social Responsibility: An Economic and Financial Framework. Geneva Papers on Risk & Insurance - Issues & practice, 30(3), 387-409 Higgins, D., Omer, T. C., Philips, J. D. (2015). The influence of a Firm’s Business Strategy on its Tax Aggressiveness. Contemporary Accounting Research, 32(2), 674-702

Highhouse, S., Brooks, M. E., Gregarus, G. (2009). An organizational impression management perspective on the formation of corporate reputations. Journal of Management, 35(6), 1481-1493 Hoi, C. K., Wu, Q., & Zhang, H. (2013). Is corporate social responsibility (CSR) associated with tax avoidance? Evidence from irresponsible CSR activities. The Accounting Review, 88(6), 2025-2059 Hung Chan, K., Lin, K.Z., Feng, T. (2013). Tax Effects of Book-Tax Conformity, Financial Reporting Incentives, and Firm Size. Journal of International Accounting Research, 12(2), 1-25 Huseynov, F., Klamm, B.K. (2012). Tax avoidance, tax management and corporate social responsibility. Journal of Corporate Finance, 18(4), 804-827 International Accounting Standards Board. (2010). Discussion Paper on Extractive Activities. Available at http://www.iasb.org/NR/rdonlyres/735F0CFC-2F50-43D3-B5A1- 0D62EB5DDB99/0/DPExtractiveActivitiesApr10.pdf KPMG, International Survey of CSR Reporting. (2008). Available at: https://www.kpmg.com/EU/en/Documents/KPMG_International_survey_Corporate_respon sibility_Survey_Reporting_2008.pdf Knuutinen, R. (2014). Corporate Social Responsibility, Taxation and Aggressive Tax Planning. Nordic tax journal, 1, 36-75 of CSR Lanis, R., Richardson, G. A. (2012). Corporate social responsibility and tax aggressiveness: An empirical analysis. Journal of Accounting and Public Policy, 31(1), 86-108 Lanis, R., Richardson, G. A. (2015). Is corporate Social Responsibility Performance associated with Tax Avoidance? Journal of Business Ethics, 127(2), 439-457 Laufer, W.S. (2003). Social Accountability and Corporate Greenwashing. Journal of Business Ethics, 43(3), 253-261 Lyon, T., Maxwell, J. W. (2011). Greenwash: Corporate Environmental Disclosure Under Threat of Audit. Journal of Economics and Management Strategy, 20 (1), 3-41 Marin, L., Ruiz, S., Rubio, A. (2009). The role of identity salience in the effects of corporate social responsibility on consumer behavior. J Bus Ethics 84(1):65-78 McWilliams, A. (2015). Corporate social responsibility. Wiley Encyclopedia of Management, 12, 1-4 Mohr, L.A., Webb, D.J. (2005). The effects of corporate social responsibility and price on consumer responses. Journal of Consumer Affairs, 39(1), 121-157

Morsing, M. (2006). Corporate Social Responsibility as Strategic Auto-Communication: On the role of External Stakeholders for Member Identification. Business Ethics: A European Review, 15(2), 171-182 Oeberseder, M., Schlegelmilch, B., Gruber, V. (2011). Why don’t consumers care about CSR? A qualitive study exploring the role of CSR in consumption decisions. Journal of Business Ethics, 104(4), 449-460 Ostas, D.T. (2004). Cooperate, Comply, or Evade? A Corporate Executive’s Social Responsibilities with Regard to Law. American Business Law Journal, 41(4), 559-594 Poddi, L., Vergalli, S. (2009). Does Corporate Social Responsibility Affect the Performance of Firms? FEEM Working Paper, 53.2012 Preuss, L. (2010). Tax avoidance and corporate social responsibility: you can’t do both, or can you? Corporate Governance: The international Journal of Effective Board Performance, 10(4), 365-374 PricewaterhouseCoopers (PwC). (2008). Tax management in companies. Available at https://www.pwc.com/gx/en/tax-management-strategy/pdf/pwc_tax_management_in_companies.pdf Robinson, J.R., Sikes, S., Weaver, C.D. (2010). Performance Measurement of Corporate Tax Departments. The Accounting Review, 85 (3), 1035-1064 Schaltegger, S., & Wagner, M. (2006). Integrative management of sustainability performance, measurement and reporting. International Journal of Accounting, Auditing and Performance Evaluation, 3, 1-19 Sen, S., Bhattacharya C.B. (2001). Does doing good always lead to doing better? Consumer reactions to corporate social responsibility. Journal of Marketing Research, 38(2), 225-243 Sikka, P. (2010). Smoke and mirrors: corporate social responsibility and tax avoidance. Accounting Forum, 34(3/4), 153-168 Sheehy, B. (2015). Defining CSR: Problems and Solutions. Journal of Business Ethics, 131(3), 625-648 Tata, J., Prasad, S. (2015). CSR communication: An Impression Management Perspective. Journal of Business Ethics, 132(4), 765-778 The Guardian (2012). Starbucks to pay £20m in tax over next two years after customer revolt. Available at: http://www.theguardian.com/business/2012/dec/06/starbucks-to-pay-10m-corporation-tax

Timonen, P. (2008). Corporate social responsibility and strategic tax behavior - Comment on the paper by Reuven S. Avi-Yonah. In W. Scho ̈n (Ed.), Tax and corporate governance, 199-203 Vereniging van Beleggers voor Duurzame Ontwikkeling (VBDO). (2014). Sustainability Performance of Dutch Stock Listed Companies. Available at http://www.vbdo.nl/files/report/SustainabilityPerformanceofDutchStockListedCompanies.p df Vereniging van Beleggers voor Duurzame Ontwikkeling (VBDO). (2015). Sustainability Performance of Dutch Stock Listed Companies. Available at http://www.vbdo.nl/files/media/SustainabilityperformanceofDutchstocklistedcompanies.pd f Vereniging van Beleggers voor Duurzame Ontwikkeling (VBDO). (2015), Tax Transparency Benchmark 2015 A comparative study of 64 Dutch listed companies. Available at http://www.vbdo.nl/files/news/VBDO_TaxTransparencyBenchmark2015.pdf