Firm Responses to Public Shaming: Evidence from the European Union
P8-S195-2
Presented by: Raphaëlle Soffe
Global offshore wealth is estimated to be equivalent to 10% of global GDP. In an effort to recapture these funds for domestic taxation, policymakers have turned to naming and shaming tax havens and firms engaged in tax avoidance. However, when and why public shaming strategies affect the behavior of organizations such as firms remains largely unknown. We therefore analyze the impact of two EU Directives, which both mandate the disclosure of tax data starting in 2025, on corporate tax payments. Employing a difference-in-differences design, we find evidence that corporations are already increasing their effective tax rates in anticipation of public shaming, and that the effect is primarily driven by "ESG-conscious" firms. Our findings provide one of the first pieces of causal evidence that public shaming measures imposed by international organizations can be effective in changing the long-run behavior of multinational corporations, even before they enter into force.
Keywords: Business and government, regulation, taxation, corporate governance