Anecdotal evidence often suggests that multinational

enterprises (MNEs) operating in developing countries

"exploit their multinationality" to avoid paying

taxes to host governments. This article explores the concept of

"responsible tax" as a corporate social

responsibility (CSR) issue for MNEs, based on the notion that

MNEs face considerable variation in the extent, monitoring, and

application of tax laws internationally. This variation creates a

"moral free space" as to which tax payments to

make. Using firm-level data from three important sectors in

India, the authors explore whether foreign MNE subsidiaries pay

higher taxes than local firms, and whether, in the case of MNEs,

there are differences between subsidiaries of MNEs with and

without a reputation for CSR. The results show that MNEs pay

considerably higher effective tax rates than do local firms, and

MNE subsidiaries known for CSR pay more tax than do MNE

subsidiaries less known for CSR. This set of findings suggests

that MNEs operating in India see taxation in developing

countries in relation to CSR.