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Our study provides the most comprehensive empirical analysis to date of the multiple effects of publicly disclosing business tax-return information, which continues to be an active policy issue around the world.

The findings suggest that there can be private costs to disclosure even for firms that are obeying the tax law. For instance, we find that disclosure of a zero tax liability without any context in which to interpret and understand the reason likely leaves some firms who are not evading taxes in a situation where they experience negative consumer, investor, or policy attention.

However, while we find negative responses to the tax disclosures we examine, the magnitude of the responses is relatively small. These findings are important for policymakers to consider in the design of disclosure rules.

There is currently widespread public and political pressure for action to limit perceived harmful tax practices by businesses. One response to this pressure has been to increase the amount of information available to taxing authorities for enforcement, while another is to improve accountability and compliance via mandatory tax disclosure to the public.

The latter response is of particular concern to firm managers, fearing that the private costs of tax-related public disclosure will outweigh the benefits. For instance, it can potentially create compliance burdens, divulge sensitive information, generate confusion about company behavior, and impose unwarranted reputational damage on firms. Although more transparency results in potential costs that must be weighed against the perceived benefits, policy discussions generally proceed in a near-absence of evidence about its potential impacts.

Our study seeks to fill this void by considering the recent case wherein the Australian Taxation Office (ATO) disclosed firm-level data from Australian company tax returns, including income and taxes payable, for many listed and private firms. Due to the late nature of a private-company amendment, the first report (December 2015) included 1,538 Australian listed and foreign-owned private companies, while the second (March 2016) included 321 Australian-owned private companies. We analyze a variety of potential effects, focusing on changes in firm behavior, consumer sentiment, and investor responses.


Our analysis suggests that legislating disclosure of tax-return data has several potential effects that are all inter-connected. For example, one cannot fully understand investor reactions without considering consumer and firm reactions, as investors will try to price consumer responses and firm responses.

Moreover, firms’ responses will depend on managers’ beliefs about consumer and investor reactions.  For instance, firms may try to avoid disclosure because they fear a consumer response, change their real behavior as a result of public pressure, or alter their disclosure practices. We examine all of these effects in the context of a unique piece of legislation.

We highlight the following conclusions about the Australian disclosure initiative, none of which has been addressed by existing studies concerning public disclosure of tax information:

  • Listed and private firms respond differently to public tax-return
  • Private firms are more likely to change their behavior to avoid being subject to
  • Listed firms remit less tax and private firms remit more tax after
  • Private firms are more likely to experience consumer backlash than listed
  • Negative investor response is likely due to expectations about policy
  • These responses occur in a setting where firms are not necessarily illegally evading

Analyzing aggregated tax return data provided by the ATO over a 4-year period, we observe that private companies took relatively more action to avoid public disclosure than listed companies. The effect of public disclosure appears to have raised the tax remittances of private companies but lowered the tax remittances of listed companies, consistent with likely differences in disclosure costs among firms.

Analyzing consumer sentiment survey data, we found that private firms subject to disclosure experienced a small decline in consumer sentiment, suggesting that expectations of consumer backlash may have motivated some private firms to avoid disclosure.

Analyzing stock return data, we find a negative investor reaction to both anticipated and actual disclosure for listed firms. Cross-sectional tests point to anticipated policy backlash resulting in value-reducing changes to the tax code as the likely source of the reaction. For instance, in the 2016−17 Budget, the Australian government announced that it would introduce a diverted profits tax, effective on 1 July 2017. The momentum for this new law was almost certainly fueled by public scrutiny of, and in some cases outrage at, the newly disclosed tax information.

We stress in our study the importance of focusing on differential firm, consumer, and investor response to disclosures of what we term “paid no tax”. The only existing published studies on the effects of public tax-return disclosure use media reports of tax shelter involvement as the measure of tax information being disclosed. Tax shelter involvement generally has a negative connotation, and this measure relies on the media to inform. Indeed, in the two existing papers (Hanlon and Slemrod 2009; Gallemore et al. 2014) that examine tax shelter involvement and market outcomes, the sample consists of firms participating in illegal tax shelters, which not only will resonate as more negative with the public, but were found by the tax authority to be illegal, and generally resulted in additional taxes, fines, fees, and penalties being paid. The implication of merely remitting no tax is less clear, because this could in principle result simply from poor performance.


The Australian setting is closely related to the policy debates about disclosure of tax information because the items generally considered for disclosure are, for instance, tax remittances and income by country. Likewise, release of tax data in the form of public country-by-country reporting is a possibility in the United States and all European Union member states, where important debates regarding public scrutiny of tax information are currently taking place.

How firms and their stakeholders respond to this information is important. It does not necessarily imply that a firm has done anything illegal (that is, has evaded its tax obligations) and the disclosed information can be misinterpreted, but at the same time it is relatively easy to access (if not accurately processed) by the average person. Indeed, usage statistics for the ATO website where the data were disclosed indicate significant spikes in page views during December 2015 and March 2016 when the listed and private company tax return data, respectively, were made available to the public. This suggests that many interested parties were viewing the data.

Another outcome of the Australian disclosure legislation is the potential for more voluntary disclosure by businesses. There was limited time after the disclosure event, at the time of our study, for us to examine this issue. Our preliminary analyses provide some evidence of companies attempting to explain to the public and investors the implications of the information contained in the ATO disclosure.

However, a great majority of companies did not respond in this way immediately after the disclosure event. Understanding whether mandatory disclosure prompts voluntary disclosure would be a fruitful future research project.

Further Reading

Hoopes, JL, Robinson, L & Slemrod, J 2018, ‘Public tax-return disclosure’, NBER Working Paper no. 24318, National Bureau of Economic Research, Cambridge. The paper is forthcoming in the Journal of Accounting and Economics.

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