Making companies give to charity sounds like a tax break, but it actually ends up forcing them to pay even more to the government.
March 27, 2026
Original Paper
Complements or Substitutes? CSR and Corporate Tax Compliance
SSRN · 6358804
The Takeaway
Economists often assume that firms treat 'doing good' and 'paying taxes' as substitutes—if they are forced to spend on CSR, they might try to save money by avoiding taxes. However, data from India shows the opposite: firms that comply with charity mandates also voluntarily reduce their tax avoidance, suggesting that corporate responsibility is a 'package deal' rather than a trade-off.
From the abstract
This paper examines how mandating corporate social responsibility (CSR) spending affects firms' tax behavior. The 2013 Indian CSR spending mandate requires qualifying firms to spend at least 2% of their profits on CSR. Exploiting this exogenous regulatory shock through a difference-indifferences design and a regression discontinuity framework, we provide causal evidence on how mandatory CSR spending affects firms' tax behavior. We find that firms that comply with the mandate exhibit higher effec