Anticipatory effects of corporate tax shaming: evidence from the European Union

Offshore wealth is estimated at 10% of global GDP. To curb tax avoidance, policymakers have adopted tax transparency reforms. We analyze anticipatory effects associated with the EU’s Directive on Public Country-by-Country Reporting, which mandates that large multinational corporations disclose key financial data starting in 2026. Firms subject to higher media scrutiny and with ESG scores increased their effective tax rates by 5-8 percentage points (pp) after the announcement of the Directive in 2021. In contrast, we find that banks, which are exempt from the Directive, decreased their tax rates by more than 7 pp. We point to changes in the media spotlight and NGO scrutiny to explain, in part, the heterogeneity in responses across industries.