No. 254: Stakeholder Responses to Publicly Scrutinized Corporate Tax Avoidance: Experimental Evidence across Eight Countries

Aggressive corporate tax planning may benefit stakeholders economically while conflicting with norms of fairness and corporate responsibility. Tax transparency and public scrutiny make firms’ tax practices salient to stakeholders, potentially bringing moral concerns into conflict with the economic benefits of affiliation. We examine how individuals resolve this moral-economic trade-off as prospective investors, consumers, and employees. In an incentivized online experiment with 6,773 participants across eight OECD countries, we measure the additional compensation-the moral premium-required to affiliate with a firm presented as tax aggressive rather than tax responsible. Sixty-three percent demand a positive premium; across all participants, the average is 2.65 percentage points. Employees are most likely to require compensation and investors least likely, whereas consumers demand the largest premiums among those requiring compensation. These stakeholder-specific patterns are broadly consistent across countries, although average premiums vary substantially. At the country level, moral premiums are positively associated with stronger institutional representation of employee stakeholder interests and negatively associated with institutional quality and a more right-leaning average political orientation. Our findings demonstrate that moral concerns about corporate tax avoidance can affect stakeholder choices even when acting on those concerns entails foregoing private economic benefits, providing a behavioral basis through which tax transparency can generate reputational pressure.