We investigate whether the geographic concentration of non-EU immigrants in the various Italian provinces affects labour tax avoidance practices adopted by firms located in the same provinces, as well as in the neighbouring provinces, and operating in construction and agriculture industries that mostly employ immigrants in Italy. For this purpose, we develop a LTAV proxy based on the financial accounting information of a sample of 993,606 firm-years, disseminated throughout the 108 Italian provinces, over the period 2008–2016. Our results, based on (...) a Spatial Durbin Model panel regression, reveal a statistically significant positive association between the concentration of non-EU immigrants and LTAV at province level, as well as the presence of spillover effects among neighbouring provinces. Our findings are robust to several additional analyses, including instrumental variable estimations. Our study provides empirical support to previous structuralist or marginalization theories holding that socioeconomically marginalized groups, such as non-EU immigrants, are more likely to be involved in labour exploitation practices, which could underlie our LTAV outcomes. Furthermore, it supports the need for tax authorities to strengthen labour inspections, coordinated at national level, especially in those contexts where non-EU immigrants are mostly employed. On the other hand, a greater social integration, assistance, and recognition of rights of immigrants may help to alleviate their situation of weakness that makes them more vulnerable to LTAV practices. Finally, tackling LTAV, associated with the underemployment of immigrants, may prevent its negative effects for society arising from the reduction of public resources to sustain the social welfare and finance public goods and services. (shrink)

This article joins a somewhat nascent, but growing, body of scholarship addressing the ethical obligation to pay tax. The analysis is grounded to the ethical duty to obey law generally and highlights two competing orientations to statutory interpretation. The norms of self-interested advocacy suggest that tax planners should assert that interpretation that will generate the most wealth for the client. The norms of professional advising, by contrast, direct the tax planner to interpret tax law with reference to plain meaning, interpretive (...) maxims, court precedents, and legislative purpose. When the two orientations differ, the ethical duty to obey law requires the tax planner to recommend, and for the taxpayer to follow, the latter view. Case studies drawn from a Louisiana sales tax avoidance scheme and from Google’s profit-shifting activities illustrate the ethical issues incumbent in tax interpretation. (shrink)

This study adopts moral reasoning strategies to investigate why consumers support companies involved in ethical transgressions. Drawing on several cases of real multinationals publicly involved in tax avoidance practices, it aims to demonstrate that moral rationalization and moral decoupling depend not only on how consumers perceive the magnitude of the transgression, but also on their individual differences, such as political ideology and brand identification. A quantitative study with a sample of 3989 consumers of five different focal brands was employed to (...) test a set of hypotheses. Findings reveal that moral decoupling directly explains purchase intentions. However, rationalization only explains behavioral intentions if it leads to a reduction in the perceived immorality of the action. Furthermore, the study reveals significant differences across personal values. Left-leaning individuals tend to rationalize less and decouple more when they perceive that the magnitude of the transgression as egregious. Interestingly, consumers who are highly identified with the brand are less affected by the transgression and tend to be more supportive toward the brand by engaging in rationalization mechanisms. (shrink)

Managers of multinational companies often favour an aggressive tax avoidance strategy that pushes the legal limits onto the advantage of shareholders and the disadvantage of the spirit of democratically legitimized tax laws. The public and media debate whether such aggressive behaviour is immoral. Aggressive tax avoidance is a subset of the aggressive legal interpretations potentially observable in all fields which places little weight on the will of a democratically legitimized legislation. A thorough ethical analysis based on the deontological approach of (...) Kant demonstrates that aggressive tax avoidance as a special case of operating on the edge of legal boundaries is potentially immoral. Applying the Kantian “contradiction of conception or will” test shows that this maxim might not be conceived or willed as a general law of nature. If all natural or legal persons aggressively interpret laws on all subjects and in every imaginable situation, then central principles of the system of law we all rely upon would be severely compromised. Therefore, aggressive tax avoidance by managers of multinational companies may violate the managers’ moral duty to obey not only the letter but also the intention or spirit of the law. The validity of the argumentation depends critically on the formulation and interpretation of the respective maxims and on assumptions about the legal system. Preserving central elements of Kantian philosophy, the article demonstrates the complexity of a philosophical argumentation which tries to justify the moral intuitions that underpin the common negative evaluation of aggressive legal strategies in business. (shrink)

This study investigates the conditions under which host country portfolios are more likely to regularize corporate tax behavior. We use a sample comprising data on Japanese multinationals covering 2004 to 2014 to examine the relationship between foreign direct investment host country portfolios and tax avoidance from the perspectives of investor protection and ethical standards. Our multivariate regression results show that the number of countries with strong investor protection/high ethical standards in the FDI host country portfolio is negatively related to tax (...) avoidance. We also find that the effect of investor protection/ethical standards is less pronounced when the degree of indulgence is high. Further analyses show that the relationships we find are affected by disclosure requirements, local regulations, and accounting standards. These findings remain unchanged after several sensitivity checks. Overall, this study contributes to the business ethics literature by showing that FDI host country investor protection and ethical standards are external monitoring mechanisms for mitigating tax avoidance by multinationals. (shrink)

Natural disaster events such as drought affect the broader economy and inflict adverse consequences for firms because of spill-over effects in an integrated economy. Contrary to the expectation that firms would engage in higher levels of corporate tax avoidance strategies when they experience a negative cash flow shock, we document consistent evidence that firms engage in less corporate tax avoidance when their headquarter states experience drought. Reduced tax avoidance is more pronounced among firms with higher CSR performance and among firms (...) operating in states that experience a GDP decline. Collectively, the findings of our study demonstrate prosocial and ethical behavior of U.S. firms when they experience natural disaster events. (shrink)