Müller and Voget investigate the economic effects of tax transparency on firms and stakeholders. They aim to understand how the set of recipients affects the firm-specific costs and benefits of tax transparency. Beyond mandatory disclosures to tax authorities, stakeholders’ interest in firms’ tax strategies has risen, and they may demand voluntary tax disclosure. B07’s insights help disentangle the interplay between firms’ managerial decisions (e.g., real activities, disclosure choices) and (anticipated) stakeholder reactions and provide relevant and timely implications for the public debate about tax transparency, as legislators and standard setters are gradually extending tax transparency toward public tax disclosure.
How does tax transparency affect firms and their stakeholders?
Motivation zur Forschung
We investigate the economic effects of tax transparency on firms and stakeholders. Legislators continue to increase transparency requirements with respect to business taxes. These disclosure mandates aim to
foster tax compliance and counter tax avoidance. At the same time, stakeholders’ interest in firms’ tax strategies has risen, potentially rewarding voluntary tax transparency. Increasing transparency between the sender of information, that is, firms, and the recipient, for example, the government (with private disclosure) and the general public (with public disclosure), may achieve the desired objectives, but it may
also entail unintended consequences. Therefore our empirical research not only illuminates the channels and magnitude of the effects of tax transparency mandates but also of voluntary tax transparency.
We will build on but recalibrate our analyses on the costs and benefits of tax transparency. Taking the importance of stakeholders into account, we will now focus on whether firms’ tax information is provided only to selected (private transparency) or unspecified recipients (public transparency). Thus our insights will help disentangle the interplay between firms’ managerial decisions (e.g., real activities or disclosure choices) and (anticipated) stakeholder responses. NLP methods will allow us to assess the content of tax-related information distinctively and map it more clearly to firms’ incentives and stakeholder reactions. We will study the moderating effect of public tax transparency not only on firms but also on tax reforms. We will investigate financial statements, media, and analyst disclosure choices, which affect public tax transparency.
We will contribute empirically to the understanding of the costs and benefits of firms’ tax transparency, mainly triggered by their stakeholders. As tax transparency regulation developed rapidly in recent years, gathering data in post-reform periods allows for new perspectives in research and assessing longer term effects of policies. Against the background of the recent economic challenges (the COVID pandemic,
Ukraine war, and inflation), we expect tax transparency to become an even more relevant matter, as governments strive to increase tax revenues.