Social and Environmental Accountability Journal

ISSN: 0969-160X (Print) 2156-2245 (Online) Journal homepage: http://www.tandfonline.com/loi/reaj20

Corporate Social Responsibility and Tax

Aggressiveness: A Test of Legitimacy Theory

Even Fallan

To cite this article: Even Fallan (2015) Corporate Social Responsibility and Tax Aggressiveness:
A Test of Legitimacy Theory, Social and Environmental Accountability Journal, 35:3, 198-200,
DOI: 10.1080/0969160X.2015.1093778

To link to this article: http://dx.doi.org/10.1080/0969160X.2015.1093778

Published online: 01 Oct 2015.

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 198 Article Reviews

reporting away from the win – win to how unsustainable an organisation is in its operations and
thus its sustainability gap.
While this review cannot do justice to the depth of the article, what is evident is that it contains
important considerations for sustainability reporters, particularly with regard to the change of
framing and thus perspective that comes from considering reports as a ‘discharge’ of accounts
with a focus on ‘burden’. For this reviewer such a shift would likely result in a very different tone
for sustainability reports and such a change in tone would bring forward inconvenient truths.
However, this said there is one final point for consideration. The underlying ontology referred
to through the tone of the paper, for this reviewer at least, is one of considering humanity’s
place within nature. This human nature dualism, and thus dualistic thinking, is arguably at the
root of much unsustainable thinking (see, for example Castree 2002; Gladwin, Kennelly, and
Krause 1995). If it is accepted that humans are of the earth and thus there is a monism, there
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is no separation; humans are the earth involved in the transformation of itself (Ingold 2011).
If a monistic understanding is taken, the challenge of sustainability reporting might not be
‘W(H)Ither Ecology’ or how unsustainable organisations actions are, but rather how does sus-
tainability reporting help or hinder our evolution?

References
Castree, N. 2002. “False Antitheses? Marxism, Nature and Actor-networks.” Antipode 34 (1): 111– 116.
Gladwin, T. N., J. J. Kennelly, and T. S. Krause. 1995. “Shifting Paradigms for Sustainable Development: Implications
for Management Theory and Research.” Academy of Management Review 20 (4): 874–907.
Ingold, T. 2011. Being Alive: Essays on Movement, Knowledge and Description. Abingdon: Routledge.
Wackernagel, M., and W. E. Rees. 1996. Our Ecological Footprint: Reducing Human Impact on the Earth. Philadelphia,
PA: New Society.

Nick Barter
Griffith University, Australia
# 2015, Nick Barter
http://dx.doi.org/10.1080/0969160X.2015.1093777

Corporate Social Responsibility and Tax Aggressiveness: A Test of Legitimacy Theory

R. Lanis and G. Richardson
Accounting, Auditing & Accountability Journal, 2013, 26 (1), pp. 75– 100

To me the idea that taxes are contributions to society is intuitively reasonable. It is a corporate
social responsibility (CSR). Both tax behaviour and CSR reporting strategy are corporate
decisions. Hence, otherwise identical companies might have different effective tax rates
(ETRs) and CSR disclosures. Despite the large number of research studies on both tax aggres-
siveness and CSR reporting, only recently a few studies examining the relation between the two
have been published. Lanis and Richardson are important contributors in this field.
Lanis and Richardson (2013) compare CSR disclosures of 20 ‘tax aggressive’ companies with
20 matched, assumed non-tax aggressive entities (definitions discussed below). They find that
tax aggressive companies disclose significantly more CSR information than others. The
authors suggest that a high degree of tax aggressiveness is ‘considered by the public to constitute
socially irresponsible or illegitimate activity’ (p. 79), that is, the companies are not paying a fair
share of taxes. The authors argue that CSR disclosures are used strategically to repair corporate
legitimacy.
 Article Reviews 199

Lanis and Richardson (2013) present the study as a test of legitimacy theory. It is noticeable
that depending on which of Lindblom’s (2010) four situations or strategies to secure legitimacy
that are relevant to the companies in the study, the result of the study links opportunistic tax be-
haviour to opportunistic CSR disclosure. The study illustrates a link between legitimacy theory
and agency theory. While agency theory is probably the most common theoretical framework in
tax behaviour research, legitimacy theory definitely the most popular framework among CSR
reporting researchers.
However, while Lanis and Richardson (2013) find a positive relation between tax aggressive-
ness and CSR disclosure, in an earlier paper, they come to the opposite result (Lanis and
Richardson 2012). Both studies use sample sets of companies listed on the Australian Stock
Exchange. These apparently contradictory findings (Ylönen and Laine, forthcoming) motivate
further research on the topic and a closer look at the papers.
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One important factor which might explain the different findings in these studies is the defi-
nition and operationalisation of tax aggressiveness. Tax aggressiveness concerns how much
companies reduce current tax payments. This may be done through legal corporate tax planning,
ethical questionable tax avoidance and/or illegal tax evasion. Lanis and Richardson (2012)
measure tax aggressiveness by the use of ETRs. Without going into too many details here,
the way ETRs are calculated means that this measure considers both tax planning, avoidance
and evasion. Lanis and Richardson (2012, p. 91) even state that ETR is ‘the proxy measure
for tax aggressiveness most frequently used by academic researchers’. However, Lanis and
Richardson (2013) implicitly define tax aggressiveness differently. Companies are separated
into two groups, depending on whether the Australian Tax Office has accused them of tax
aggressive behaviour or not. The Tax Office accepts legal tax planning, so tax aggressiveness
includes only tax evasion and (partly?) tax avoidance in the 2013 study.1 The importance of
this difference in definition/operationalisation of tax aggressiveness between the two studies
manifests itself when Lanis and Richardson (2013) report that there is no significant difference
in ETRs between the two groups in the 2013 study.
Another crucial factor, relating to both studies, is the use of CSR disclosure as one hom-
ogenous concept. CSR is a diffuse and heterogeneous concept. Corporate reporting practices
concerning community involvement, the natural environment, energy, work environment/
human resources, customers, products, social issues, corruption, etc. vary significantly
(Branco and Rodrigues 2008; Deegan, Rankin, and Voght 2000; Gray, Kouhy, and Lavers
1995; Williams and Pei 1999; Zéghal and Ahmed 1990). It is not likely that the relation
between tax aggressiveness and disclosure is the same for the different CSR issues. In the
same way, a separation between voluntary and mandatory disclosure seems necessary (Fallan
and Fallan 2009; Gray, Kouhy, and Lavers 1995). While the choices made by Lanis and Richard-
son (2012, 2013) is ok in such early papers, I think research designs should be modified by future
studies.
Moreover, the question of the most appropriate proxies for CSR disclosure measurement
could also consider other aspects. It might be difficult to compare results when Lanis and
Richardson (2013) use number of sentences as a proxy for CSR disclosure, while the 2012
paper analyses the existence of different types of information content (a dichotomous variable).
State-of-the-art research on CSR disclosure measurement might even suggest more valid proxies
(Beck, Campbell, and Shrives 2010).
Lanis and Richardson (2012, 2013) have chosen not to cross reference these two papers. I
think they should not be afraid of doing that. The contradictory findings provide important
input for validity considerations that should be welcomed on a maturing research field.
 200 Article Reviews

Note
1
Another issue is that this sampling technique means that a company is classified as non-tax aggressive as long as it is
not caught in illegal activity by the Tax Office, irrespective of actual tax aggressive behaviour.

ORCID
Even Fallan http://orcid.org/0000-0002-7272-1742

References
Beck, A. C., D. Campbell, and P. J. Shrives. 2010. “Content Analysis in Environmental Reporting Research: Enrichment
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and Rehearsal of the Method in a British-German Context.” The British Accounting Review 42: 207– 222.
Branco, M. C., and L. L. Rodrigues. 2008. “Factors Influencing Social Responsibility Disclosure by Portuguese Compa-
nies.” Journal of Business Ethics 83: 685–701.
Deegan, C., M. Rankin, and P. Voght. 2000. “Firms’ Disclosure Reactions to Major Social Incidents: Australian Evi-
dence.” Accounting Forum 24 (1): 101– 130.
Fallan, E., and L. Fallan. 2009. “Voluntarism Versus Regulation: Lessons from Public Disclosure of Environmental Per-
formance Information in Norwegian Companies.” Journal of Accounting & Organizational Change 5 (4): 472– 489.
Gray, R., R. Kouhy, and S. Lavers. 1995. “Corporate Social and Environmental Reporting: A Review of the Literature
and a Longitudinal Study of UK Disclosure.” Accounting, Auditing & Accountability Journal 8 (2): 47– 77.
Lanis, R., and G. Richardson. 2012. “Corporate Social Responsibility and Tax Aggressiveness: An Empirical Analysis.”
Journal of Accounting and Public Policy 31: 86– 108.
Lindblom, C. K. 2010. “The Implications of Organizational Legitimacy for Corporate Social Performance and Disclos-
ure.” In Social and Environmental Accounting Volume II Developing the Field, edited by R. Gray, J. Bebbington,
and S. Gray, 51– 63. London: Sage.
Williams, S. M., and C.-A. H. W. Pei. 1999. “Corporate Social Disclosures by Listed Companies on Their Web Sites: An
International Comparison.” The International Journal of Accounting 34 (3): 389–419.
Ylönen, M., and M. Laine. Forthcoming. “For Logistical Reasons Only? A Case Study of Tax Planning and Corporate
Social Responsibility Reporting.” Critical Perspectives on Accounting.
Zéghal, D., and S. A. Ahmed. 1990. “Comparison of Social Responsibility Information Disclosure Media Used by Cana-
dian Firms.” Accounting, Auditing & Accountability Journal 3 (1): 38–53.

Even Fallan
Hedmark University College, Norway
# 2015, Even Fallan
http://dx.doi.org/10.1080/0969160X.2015.1093778

An Exploration of NGO and Media Efforts to Influence Workplace Practices and Associ-
ated Accountability Within Global Supply Chains
Craig Deegan and Muhammad Azizul Islam
The British Accounting Review, 2014, 46 (4), pp. 397– 415

A number of studies on the motivations for social and environmental disclosures have identified
non-governmental organisation’s (NGO) actions and media attention as important factors that
influence corporate disclosure decisions. Whilst prior research has examined the impact of
these factors somewhat in isolation, this paper analyses how NGOs and the news media interact
to influence the social performance and related accountability of multinational buying compa-
nies’ (MBCs’) supply chains located in developing countries. The research focuses on supply
companies based in Bangladesh, who produce goods for large high profile MBCs, such as
Nike and Reebok, a context that has been associated with poor labour conditions and a lack