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Societal Trust And Corporate Tax Avoidance, Kiridaran Kanagaretnam, Jimmy Lee, Chee Yeow Lim, Gerald J. Lobo

Research Collection School Of Accountancy

Using an international sample of firms and a country-level index for societal trust, we study how differences in trust across countries relate to corporate tax avoidance. Consistent with our prediction, we find strong evidence that societal trust is negatively associated with corporate tax avoidance by firms, even after controlling for other determinants such as home country tax system characteristics. We also explore the effects of three country-level institutional characteristics – level of investor protection, disclosure requirement, and tax enforcement – on the relation between societal trust and tax avoidance. We predict and find that the effects of trust on tax …