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

This research investigates the impact of corporate tax strategies (i.e., tax avoidance and non-avoidance) on consumers' corporate social responsibility (CSR) perceptions, willingness to pay (WTP), and attitude toward the firm in two laboratory experiments (n = 409) in the United States and Germany. Using the Becker-DeGroot-Marschak 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 CSR perceptions. However, we find a strong effect on attitude toward the firm 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 are highly relevant when it comes to consumer responses to tax avoidance.

Automated summary

This research found a minor indirect effect of corporate tax strategies on consumers' willingness to pay, mediated by CSR perceptions, while a strong effect on attitude toward the firm, also mediated by CSR perceptions. U.S. consumers' perceptions of tax avoidance are independent of the strategy's acceptance by tax authorities, unlike German consumers. Overall, CSR perceptions play a significant role in consumer responses to tax avoidance.