Working Paper: NBER ID: w24318
Authors: Jeffrey L. Hoopes; Leslie Robinson; Joel Slemrod
Abstract: We investigate the consequences of public disclosure of information from company income tax returns filed in Australia. Supporters of more disclosure argue that increased transparency will improve tax compliance, while opponents argue that it will divulge sensitive information that is, in many cases, misunderstood. Our results show that in Australia large private companies experienced some consumer backlash and, perhaps partly in anticipation, some acted to avoid disclosure. We detect a small increase (decrease) in tax payments for private (public) firms subject to disclosure suggesting differential costs of disclosure across firms. Finally, we find that investors react negatively to anticipated and actual disclosure of tax information, most likely due to anticipated policy backlash rather than consumer backlash or the revelation of negative information about cash flows. These findings are important for both managers and policy makers, as the trend towards increased tax disclosure continues to rise globally.
Keywords: No keywords provided
JEL Codes: H25; H26; M4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Public tax return disclosure (H20) | Private companies engage in behavior to avoid disclosure (G34) |
| Public tax return disclosure (H20) | Decrease in tax payments for public firms (H29) |
| Public tax return disclosure (H20) | Increase in tax payments for private firms (H32) |
| Public tax return disclosure (H20) | Consumer sentiment towards private firms declines (D12) |
| Public tax return disclosure (H20) | Consumer sentiment towards public firms remains stable (G38) |
| Public tax return disclosure (H20) | Significant negative investor reaction (G19) |
| Anticipated policy backlash (J18) | Negative market response on disclosure dates (G14) |
| Disclosure of zero tax payments (H26) | Anticipated reduction in firm value (G32) |