Consumer Reactions to Tax Avoidance – Evidence from the United States and Germany

• In Event: 2.04 Behavioral Tax Research

Abstract

This research investigates the impact of corporate tax strategies (i.e., tax avoidance and non-avoidance) on consumers’ willingness to pay (WTP) and corporate reputation in two laboratory experiments (n=409) in the United States and Germany. Using the Becker-DeGroot-Marshak incentive-compatible mechanism, which avoids a social desirability bias found in prior research, our results indicate only a minor indirect effect of corporate tax strategies on WTP by way of the mediator corporate social responsibility (CSR) perceptions. However, we find a strong effect on reputation again mostly mediated by CSR perceptions. In contrast to German consumers, U.S. consumers’ CSR perceptions of tax avoidance are independent of whether a strategy is likely accepted by the tax authorities. Overall, we conclude that CSR perceptions seem to be highly relevant when it comes to consumer responses to tax avoidance.

Authors

• Inga Hardeck, European University Viadrina

• James William Harden, University of North Carolina-Greensboro

• David R Upton, University of North Carolina-Greensboro