Increasing Corporate Tax Disclosures: Transparency Or Greenwashing?
Outlet: Forbes
Recent academic research explores a United Kingdom reform mandating large companies to disclose reports on tax strategy. The study finds that while the mandate leads to more disclosure, it does not increase overall tax transparency. It concludes that the enhanced tax disclosure requirements may not positively affect tax disclosures as intended.
In a study titled “Tax Strategy Disclosure: A Greenwashing Mandate?” researchers examined a sample of 1,183 United Kingdom-headquartered multinational observations spanning 206 unique corporations. Among these companies, 69 provided a tax strategy report under the UK Finance Act, while the remaining 137 companies did not have to provide the disclosures. The study investigates whether mandating these disclosures improves transparency and curbs tax avoidance. This article is co-authored by Katarzyna Bilicka of Utah State University, Elisa Casi of NHH Norwegian School of Economics, Carol Seregni of The Wharton School, and Barbara Stage of WHU—Otto Beisheim School of Management.
In discussing the motivation for the research, Casi says, “Governments increasingly rely on disclosure regulations to induce changes in corporate behavior. They expect these rules to work through “naming and shaming”. However, it is unclear whether public scrutiny always works.” She goes on to say, “Our interest was sparked by PwC reports highlighting the surprisingly high volume of voluntary tax-related qualitative disclosures among FTSE100 firms in the UK. This led us to explore how such disclosure practices changed when a regulatory reform made them mandatory. We set out to better understand how external forces influence both firms’ actual tax behaviors and their qualitative tax disclosures. In particular, we wanted to examine whether public pressure could drive real behavioral change in the context of non-numerical, qualitative disclosures, as the regulator had hoped.”
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