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How Firms’ Tax Incentives Affect Their Corporate Social Responsibility Activities: Evidence From Thailand’s Tax Cut in 2012

Author

Listed:
  • Poonyawat Sreesing

    (Department of Business Economics, Assumption University, Thailand)

  • Zhuoran Zhang

    (Master of Science Program in Finance and Economics, Assumption University, Thailand)

  • Kai-Ping Huang*

    (Department of Business Administration, Fu Jen Catholic University, Taiwan, R.O.C.)

Abstract

This study aims to examine whether and to what extent tax incentives given to firms affect their corporate social responsibility activities. We use a corporate tax cut which took place in Thailand during 2012 and 2013 to explore the corporate tax allowance on corporate social responsibility activities. Such a tax cut constitutes a nature experiment that allows us to study precisely the behaviors of firms before and after the policy shift. Our analysis reveals the importance of tax incentives in explaining the corporate social responsibility activities. That is, we find that corporate income taxes and the CSR activities are negatively correlated. A large-scale tax cut led to potential higher profitability, which makes firms becoming financial more capable of investing in larger CSR projects which they would not, be able to consider under the tougher tax scheme. This result provides important implications to policymakers, not only in Thailand but also elsewhere, on whether benefits of tax-shielding serve as a key motivation to the firms’ corporate social responsibility activities.

Suggested Citation

  • Poonyawat Sreesing & Zhuoran Zhang & Kai-Ping Huang*, 2019. "How Firms’ Tax Incentives Affect Their Corporate Social Responsibility Activities: Evidence From Thailand’s Tax Cut in 2012," The Journal of Social Sciences Research, Academic Research Publishing Group, vol. 5(3), pages 615-619, 03-2019.
    • Handle: RePEc:arp:tjssrr:2019:p:615-619
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    References listed on IDEAS

    as
    1. Jinhua Cui & Hoje Jo & Haejung Na, 2018. "Does Corporate Social Responsibility Affect Information Asymmetry?," Journal of Business Ethics, Springer, vol. 148(3), pages 549-572, March.
    2. Halkos, George & Skouloudis, Antonios, 2016. "Corporate responsibility and national institutions: A quantitative assessment," MPRA Paper 70210, University Library of Munich, Germany.
    3. Elena Platonova & Mehmet Asutay & Rob Dixon & Sabri Mohammad, 2018. "The Impact of Corporate Social Responsibility Disclosure on Financial Performance: Evidence from the GCC Islamic Banking Sector," Journal of Business Ethics, Springer, vol. 151(2), pages 451-471, August.
    4. Mustaruddin Saleh & Norhayah Zulkifli & Rusnah Muhamad, 2010. "Corporate social responsibility disclosure and its relation on institutional ownership: Evidence from public listed companies in Malaysia," Managerial Auditing Journal, Emerald Group Publishing, vol. 25(6), pages 591-613, June.
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