No. 40: Tax Strategy Disclosure: A Greenwashing Mandate?

Year: 2022
Type: Working Paper


We investigate the effects of a qualitative tax disclosure mandate aimed at improving the availability of tax information and tax compliance by imposing reputational costs for firms. We use, as an exogenous shock, the 2016 UK reform that required the disclosure of tax strategy details by large businesses. We find that treated firms—those that must publish a tax strategy report—significantly increase the volume of tax strategy disclosure in their annual reports but also provide more boilerplate statements. Disclosure volume and boilerplate increase the most for high public pressure and tax aggressive firms. We show the important role that public pressure plays in facilitating this increase in disclosure volume, even in the absence of the mandate. We document no significant effect on tax avoidance. Our findings indicate that this requirement for qualitative tax disclosure has incentivized firms to portray themselves as “good tax citizens” without actually changing their tax practices.

Participating Institutions

TRR 266‘s main locations are Paderborn University (Coordinating University), HU Berlin, and University of Mannheim. All three locations have been centers for accounting and tax research for many years. They are joined by researchers from LMU Munich, Frankfurt School of Finance and Management, Goethe University Frankfurt, WHU – Otto Beisheim School of Management and University of Cologne who share the same research agenda.

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