Corporate Behavior: An Exploratory Study of the Brazilian Tax Management from a Corporate Social Responsibility Perspective

Abstract

A look into the literature on corporate social responsibility (CSR) reveals few studies focusing on the relationship between ethical concerns and corporate behavior of companies that perform tax evasion management. This study links tax management with ethics and CSR reporting. The purpose of this article is to analyze financial and social responsibility information disclosed by the five main Brazilian construction companies that are being investigated in Brazil’s Operation Car Wash (Operação Lava-Jato—in Portuguese) because of inappropriate behavior. Based on the theoretical concepts of organizational façades and organized hypocrisy, we used content-analysis methodology and lexical search approach to analyze the consistency between the practices of tax management and CSR reporting. The results reveal evidence of aggressive tax management. To meet its tax management objectives, a company usually manages and plans taxes accordingly, delaying the payment of tax debt and not reporting all tax risks, thus being fined for violations of the law. We found evidence of organized hypocrisy and organizational façades, since there are contradictions between the tax behavior of the investigated companies and their CSR and ethical discourse.

Tax Evasion, Corporate Social Responsibility and National Governance: A Country-Level Study

“…From a distinct perspective, a significant research branch highlights that CSR disclosures may turn into a corporate cosmetic tool to achieve private goals and gains, to improve the company's image, and to alleviate the reputational risk arising from socially irresponsible activities [24,29]. This view follows traditional economic and legitimacy-based theories as well as the notions of organisational façades and organised hypocrisy and suggests a positive relationship between CSR and aggressive tax actions [13,37,38].…”

“…In legitimacybased theories, companies are characterised by the use of strategical CSR disclosures for "window-dressing and impression management purposes" [41] (p. 80). Consistently, under the theoretical lens of organisational façades and organised hypocrisy, conflicting social and institutional pressures require corporations to develop façades and to become involved in hypocrisy, reducing the prospects that CSR reporting may evolve into more substantive disclosures [38,41].…”

Corporate Social Responsibility and Corporate Tax Aggressiveness: A Scientometric Analysis of the Existing Literature to Map the Future

“…The absence of consensus on corporations' responsibility could be responsible for the limited research linking CSR and corporate tax, which may be influenced mainly by the overriding view of corporations in accounting and business research that corporations' role is to make profit [35]. In addition, corporations that publicly espouse their CSR credentials are seen by the public to not engage in tax avoidance, an assertion that is contrary to what happens in practice [28,49,50]. More so, more entities disclose information under the Global Reporting Initiative (GRI), the purpose of which is not always to enhance transparency but rather legitimacy [86].…”

“…Ostensibly, discussions on sustainability, CSR disclosures, and reporting has witnessed an increasing trend and essentially rely on two competing theoretical frameworks such as legitimacy and signalling theories, which more often result in apparent contradictory conclusions regarding the relevance and impacts of such disclosures [48]. Therefore, the constructs of organizational façade and coordinated hypocrisy, described as rich and nuanced theoretical perspectives [49,50], are valuable to the discourse on sustainability and CSR disclosures since they provide intellectual space for a more systematic understanding and integration of the demands of the dominant economic landscape and the competing stakeholders to limit the choices made by individual companies.…”

“…The results show that some theories have been used to try to explain CSR and corporate tax behaviour. Examples include agency theory [66]; organizational legitimacy and legitimacy theory [43]; organised hypocrisy; organizational façades [49,50]; Hofstede's cultural dimensions [67]; political theory; moral foundations theory [68]; strategic trade-offs as well as regulatory, moral, cognitive, and pragmatic legitimacy [69]; shareholder theory [70]; and stakeholders theory. Considering the limited number of theories/perspectives used, there is the possibility for more theories to be exploited to aid in explaining the CSR-tax aggressiveness nexus in under-explored regions and different economic and institutional settings.…”