THE ASSOCATION BETWEEN CORPORATE SOCIAL RESPONSIBILITY DISCLOSURE, TAX AGGRESSIVENESS AND SUSTAINABILITY REPORT ASSURANCE: EVIDENCE FROM INDONESIA

Eko Budi Santoso
University of Ciputra, INDONESIA, ekobs3508@gmail.com

Abstract

There is a growing interest in Corporate Social Responsibility issues in developing countries such as Indonesia. Firms disclose their Corporate Social Responsibility activities and some of them provide assurance to gain recognition as socially responsible firms. However, several of those socially responsible firms involve in tax scandals and raise a question of whether Corporate Social Responsibility disclosure is used to disguise firm misconduct or as a reflection of a truly responsible firm. This study examines the association between Corporate Social Responsibility disclosure and tax aggressiveness and the role of sustainability reporting assurance to those association. This research develops a modified index according to Global Reporting Initiatives to measure Corporate Social Responsibility disclosure. Using a sample of Indonesian go public companies which issued Corporate Social Responsibility disclosure, the empirical result shows that there is a positive association between Corporate Social Responsibility disclosure and tax aggressiveness. Furthermore, results also indicate that sustainability reporting assurance mitigates those associations. The findings suggest that the stakeholders in developing countries should examine carefully firms with active Corporate Social Responsibility disclosure before labelling it as socially responsible firms.

Keywords: corporate social responsibility disclosure, tax aggressiveness, sustainability assurance, business ethics