Does tax disclosure in Global Reporting Initiative (GRI)-based sustainability reporting mitigate aggressive tax avoidance? Evidence from a developing country

Purpose This paper aims to examine whether tax disclosure in Global Reporting Initiative (GRI)-based sustainability reporting mitigates aggressive tax avoidance. Design/methodology/approach This study uses a multiple regression method for 714 nonspecially taxed firms listed on the Indonesia Stock Exchange in 2014–2018. Findings The findings demonstrate that disclosing tax payments in GRI-based sustainability reports reduces aggressive tax avoidance. Additional analysis indicates that the number of GRI-based sustainability reports positively affects aggressive tax avoidance. However, disclosing tax payments in multiple GRI-based sustainability reports negatively affects aggressive tax avoidance. Originality/value Recent prior studies demonstrate that aggressive tax avoidance does not indicate an organizational culture that devalues corporate social responsibility. This paper argues that firms cannot find the link between tax and corporate social responsibility when tax payments are not incorporated in sustainability reports. GRI considers tax a sustainability issue and seeks to institutionalize this concept by recommending that firms disclose taxes in their sustainability reports. This research analyses whether disclosing taxes in GRI-based sustainability reports may serve as a form of soft law by convincing firms that tax is a sustainability issue, thereby reducing their tax avoidance. This topic has received little attention in previous research.