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Kenan Institute 2022 Annual Theme: Stakeholder Capitalism
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Market-Based Solutions to Vital Economic Issues
Research
Mar 30, 2021

Tax Boycotts

Abstract

To what extent do consumers boycott in response to corporate tax activities? Anecdotes suggest potential consumer backlash is a meaningful deterrent to corporate tax planning, and the tax literature has developed expectations that these boycotts happen. But empirical evidence on their existence and impact is limited. We undertake a comprehensive study to examine how consumers’ purchase behavior relates to corporate tax activities, triangulating across several designs, samples, and measures. First, we survey a representative sample of U.S. consumers to examine the reported relationship between corporate tax planning and consumer behavior; we find that consumers report that precisely zero have ever boycotted a firm because of tax planning. Next, we use a granular dataset of retail scanner data to directly observe consumer purchase activity and find no consumer purchase response to negative tax news. Next, we use GPS location data to examine individual foot traffic activity at retail establishments and find little evidence that consumers change their shopping activities in response to tax news. Finally, we conduct several supplementary analyses investigating the potential consumer responses related to other corporate events. The combined evidence does not support tax boycotts as a meaningful consumer response to corporate tax activities, despite managers’ expressed concerns of tarnished consumer reputations related to firms’ tax decisions.

Note: Research papers posted on SSRN, including any findings, may differ from the final version chosen for publication in academic journals.


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