Conclusion
Motivated by a lack of scholarship on the CSR–tax relation in developing-country settings, this paper examines the association between CSR reporting and corporate economic contribution (in terms of tax payments) to society in an environment in which we believe the level of market and institutional development shapes this association. Using a sample of 1438 firm-years with mandatory CSR reports from 2008 to 2012 in China, we find a divergence between the corporate self-reporting of CSR and actual business practice for some firms. Specifically, in regions with relatively weak institutional development, firms that issue more substantive CSR reports do not pay their fair share of taxes on their profits to the government. In contrast, for firms in regions with relatively higherquality institutions, we observe greater convergence between CSR reporting and actual practice—that is, highly socially responsible firms pay their fair share of taxes. Our study pushes the boundaries of prior scholarship that separately examines CSR and CSR-embedded tax obligations or examines this relation in mature economies in which firms are likely to have a greater shared belief that paying a fair share of corporate taxes is morally and socially responsible. Our results have implications for government authorities and academic researchers. Our finding that CSR rules can become window dressing to allow some firms to pursue self-interest or economic egoism suggests that, in institutionally weak regions, additional tax scrutiny of firms that claim to engage in substantive CSR activities is warranted. Given that country-level CSR regulations do not necessarily lead to homogeneous corporate reporting behavior and that differences in social responsibility perceptions and business environments can result in differences in corporate tax strategies, researchers examining the CSR–tax relation in international settings should consider country-specific institutions in their models.
