Taking China’s 2018 value-added tax (VAT) credit refund reform as an exogenous shock to improve VAT neutrality, we use a difference-in-differences approach to explore how the reform affected corporate social responsibility (CSR). We find that the reform motivated firms to improve CSR performance. The reform has a “resource” effect, increasing internal funds and reducing financing costs, thereby enhancing firms’ ability to undertake CSR. The reform also has a “reputation” effect, stimulating firms’ willingness to engage in CSR to improve their reputations. CSR following the reform increases firm values and reduces bankruptcy risk. Our study provides fresh insights into VAT neutrality theory and is a reference for tax reform in emerging economies.