Inclusion of taxes in sustainability reports – Firms' reporting behavior and effects on tax avoidance

Tax transparency and sustainability reporting are current trends in corporate reporting. The GRI 207 standard is the first to include tax issues in the most widely used GRI framework for sustainability reporting. Using a sample of large European companies, we investigate the determinants of voluntary GRI 207 applications. Our empirical results suggest that GRI 207 tax disclosure is mainly driven by the company's attitude towards sustainability reporting, while the company's tax position is not related to the tax reporting decision. Additional analyses also provide a nuanced picture of the impact of GRI 207 tax disclosure on future tax avoidance. Our findings suggest a significant decrease in tax avoidance only if the GRI tax reporting includes quantitative country-by-country reporting, while we find no significant effects if only qualitative tax information is disclosed.