Corporate social responsibility and tax avoidance: A comment and reflection

The participation of Communist Party of China （thereafter CPC） in corporate governance is an important feature of corporate governance structure in China. CPC organizations play a political core or political leading role in both state-owned and non-state-owned companies. The institution “two-way entry and cross-appointment” combines CPC organizations with governance mechanisms such as the board of directors and the board of supervisors organically and enables CPC organizations to play significant roles in companies’ major production and operation activities. Tax avoidance not only means that more wealth can be left in companies, but also relates higher legal/regulatory risks, reputational risks, agency problems （especially “rent diversion”） and increased opacity. As an important strategic activity of a company, tax avoidance is inevitably affected by corporate governance. Although there is plenty of literature about the relationship between corporate governance and tax avoidance, it is not clear whether CPC’s participation in corporate governance through “two-way entry and cross-appointment” has a significant impact on tax avoidance activities. Using the data of A-share non-financial listed companies from 2009 to 2016, this paper examines the impact of CPC’s participation in corporate governance through “two-way entry and cross-appointment” on corporate tax avoidance. The results show that “two-way entry” has little impact on tax aggressiveness, while “cross-appointment” has a significantly negative effect on tax aggressiveness. Further tests show that “cross-representation” can decrease the likelihood that the degree of tax aggressiveness is extremely high, but it could not lead to extremely low tax aggressiveness. The results also show that “cross-appointment” can decrease tax aggressiveness significantly when it is at a high level, while the effect is not significant when it is at a low level. In summary, CPS’s participation in corporate governance has a negative effect on tax aggressiveness only when tax aggressiveness is at a high level. In addition, there is no significant difference in the impact of “cross-appointment” between state-owned and non-state-owned companies, although the authors only find weak evidence to support the negative effect of “cross-appointment” on tax avoidance in non-state-owned companies. There is no significant difference in the effect of “cross-appointment” on tax avoidance before and after 2013 either. This paper makes three contributions to the literature: First, it provides empirical evidence on the economic consequences of CPC’s participation in governance from the perspective of corporate tax avoidance behaviors. It is helpful to understand the role of CPC’s participation in governance in suppressing corporate misconduct and promoting better fulfillment of corporate tax obligations. Second, it explores and finds the asymmetric effect of CPC’s participation in governance on tax avoidance. It implies that the participation of CPC in governance will not prevent companies from normal and low risk-related tax avoidance activities. Such results extend the research of Armstrong, et al. （2015） and Li, et al. （2016）, and help to evaluate the consequences of party organizations’ participation in governance more comprehensively and objectively. Third, it enriches the literature on the relationship between corporate governance mechanisms and tax avoidance activities from the perspective of political governance.

Corporate social responsibility and tax avoidance influence each other and impact economic growth. This research also aims to provide a systematic review of research on Corporate Social responsibility and Tax Avoidance. This paper presents a systematic literature review with thirtyseven articles from reputable international journals indexed by Scopus and WoS (from 2017 until 2022). The study found that based on the classification of research methods, analytical methods dominated research by 74%, survey methods by 19%, and literature review methods by 7%. This research also showed the latest four years (2019 until 2022), the flow of distributing articles on this topic has increased every year. It can be concluded that in this study, a literature review on the topics of corporate social responsibility and tax avoidance also showed supporting variables that are rarely studied ( Firm Performance, Employee Behaviour, and related reporting). This study is needed to provide an updated overview of extant research and draw guidelines for further research. The results of this study described not only the latest research but also the research agenda for further research in Corporate Social Responsibility and Tax Avoidance.

Corporate tax avoidance is a significant international issue, resulting in annual losses of USD 100–240 billion for governments globally. Understanding the relationship between firms’ corporate social responsibility (CSR) and tax avoidance activities is crucial to uncovering their motivations for tax avoidance. However, this relationship remains unclear. This study investigates firms’ tax payment motivations from environmental, social, and governance (ESG) perspectives by examining samples of firms with high, low, and no ESG-related reputational risk. We utilize the ESG index, which offers a broader scope than conventional CSR measures. Our empirical analysis includes 3981 firm-year observations from 31 OECD countries between 2017 and 2019. To determine the relationship between ESG and tax avoidance, we develop a reputation-based ESG risk dataset that addresses the endogeneity associated with managerial decisions and simultaneity bias. This study is among the few that explore the international relationship between ESG performance and tax avoidance, contributing to the shift from CSR to ESG in discussions of tax avoidance. Our findings reveal that companies’ tax payment behavior varies based on their ESG reputational risk. Specifically, firms with high ESG risk pay more taxes when their ESG risk is elevated, whereas firms with low ESG risk do not alter their tax payments based on ESG risk. Additionally, firms without any ESG risk tend to pay more taxes as their ESG scores increase.

Corporate Governance, Incentives, and Tax Avoidance

SynopsisThe research problemThis paper explores the association between postmaterialistic culture and corporate tax-avoidance behavior.MotivationAlthough corporate tax avoidance is prevalent, the degree of tax avoidance varies across countries. Previous studies have suggested that national culture is associated with the level of tax avoidance (e.g., corruption culture in [DeBacker, J., Heim, B. T., & Tran, A. (2015). Importing corruption culture from overseas: Evidence from corporate tax evasion in the United States. Journal of Financial Economics, 117(1), 122–138. https://doi.org/10.1016/j.jfineco.2012.11.009 ], and societal trust in [Kanagaretnam, K., Lee, J., Lim, C. Y., & Lobo, G. J. (2018). Societal trust and corporate tax avoidance. Review of Accounting Studies, 23(4), 1588–1628. https://doi.org/10.1007/s11142-018-9466-y ], among others). Unlike prior studies focusing on longstanding cultural factors, this paper examined the association between corporate tax avoidance and an important current culture trend, i.e., postmaterialistic culture.The test hypothesesThere is no association between postmaterialistic culture and corporate tax avoidance.Target populationVarious stakeholders that care about corporate tax avoidance including the government, policymakers, investors, auditors, and firm managers.Adopted methodologyLinear Probability Model and Ordinary Least Squares regressions.AnalysesWe examined the association between postmaterialistic culture and corporate tax-avoidance behavior. We used a proprietary dataset of China tax audits spanning the 2011–2014 period and tested the moderating effect of tax enforcement. We also examined the external validity of our results using a cross-country sample from 21 countries over the 1993–2014 period.FindingsUsing a proprietary dataset of China tax audits, we found that firms owned by investors from countries with higher postmaterialism values were less likely to engage in tax-avoidance behavior in China. In addition, we found some evidence that the negative association between postmaterialism and tax avoidance is more pronounced when tax enforcement is stronger, indicating that national culture and formal institutions act as complements. To check the external validity of our main results, we further used a cross-country sample from 21 countries over 22 years. The evidence from the cross-country sample was consistent with the findings obtained from the China tax audits setting.

PurposeThe purpose of this paper is to investigate the direct and indirect links between corporate governance and tax avoidance using corporate social responsibility (CSR).Design/methodology/approachThis study is based on a sample consisting of 300 UK and 200 French firms over the period 2005-2017. This study is motivated by structural equations and system models that specify both a direct link and an indirect link between corporate governance and tax avoidance.FindingsThe results show that CSR fully mediates the relationship between corporate governance and tax avoidance in UK firms. In addition, in French firms, CSR partially mediates the relation between corporate governance and tax avoidance.Practical implicationsThe findings may be of interest to the academic researchers, practitioners and regulators who are interested in discovering corporate governance score, tax avoidance and CSR. Regulators must evaluate their actual corporate governance mechanisms and their country’s legal system before mandating additional governance mechanisms for firms in their country.Social implicationsThis study proved empirically that firms with a higher level of social responsibility are better positioned to obtain more transparency through reducing tax avoidance.Originality/valueThis paper extends the existing literature by examining the mediation effect of CSR on the relationship between tax avoidance and corporate governance.

This review explores the intellectual structure, research trends, and nexus within tax avoidance (TA) and corporate social responsibility (CSR) literature using the bibliometric research approach. Seventy-five peer-reviewed journal articles published between 2003 and 2022 in 56 journals were identified for the final analysis from Scopus databases. The articles were analysed and visualised with VOSviewer based on the keyword occurrence, authors, countries, and journal distribution. Even though 75 articles were identified on the interplay between CSR and tax avoidance, over sixty percent of papers were published during the last four years from only five countries. It indicates that combined CSR and tax avoidance research is emerging and has recently become a critical concern of scholarly investigation. Although the number of publications is increasing, author and country network analyses do not show a strong connection among authors and countries of publications. While the publications have been dispersed within a broader range of sources, only five journals are dominant, with three or more articles. Considering co-occurrence analysis, corporate social responsibility (CSR) and Tax avoidance are the frequently occurring terms within the publications, and they have been explored with other related areas such as corporate responsibility and sustainability, tax evasion, business ethics, corporate governance, tax havens, and earning management. Although keyword analysis shows that CSR and tax avoidance literature have been extensively studied during the past decade, this area of research is still in its infancy. Hence, more empirical research is needed from both developed and developing countries. Accordingly, this study provides exciting findings on the knowledge structures and patterns of tax avoidance and CSR research and valuable insights for future studies.

This paper investigates the relationship between corporate social responsibility (CSR) and tax avoidance. It also looks at how ownership structure impacts this relationship. Based on a sample of 300 European companies over the period 2014 - 2019, we use OLS regression models and come up with a negative relationship between corporate social responsibility and tax avoidance, which is consistent with the concepts of agency theory. Furthermore, we find that family businesses mitigate this relationship. These results show that family firms are more socially responsible than non-family firms due to their socio-emotional endowments, and consequently are less tax avoidant.

We investigate the association between corporate tax avoidance and corporate social responsibility (CSR) performance as well as the moderation effect of CSR performance consistency, using samples from South Korea. The baseline regression result suggests that there is a negative association between corporate tax avoidance and CSR performance among South Korean firms. However, as extant empirical studies find inconsistent evidence on the relationship and also the corporate culture theory suggests that the relationship could be non-monotonic and consistency is a important element to be considered in the model, we separated samples into two groups based on CSR performance, and re-examined the relationship with interaction term of CSR performance and CSR consistency as explanatory variable. Our empirical evidence suggests that tax avoidance is negatively associated with CSR performance for a high CSR performance group, whereas tax avoidance is positively associated with CSR performance for a low CSR performance group. Furthermore, our regression results indicate that a firm’s tax avoidance is negatively associated with the firm’s consistently high CSR performance, while a firm’s tax avoidance is positively associated with consistently low CSR performance.

This study explores the relationship between corporate social responsibility (CSR) decoupling and tax avoidance, as well as the moderating effect of sustainable boards on this relationship. Based on agency and legitimacy theories, we used panel data of listed firms headquartered in the European Union (2076 firm‐year observations) in the 2017–2022 fiscal period. In line with the theoretical framework and based on several regression analyses, we found that CSR decoupling and tax avoidance were significantly positively related. In line with the assumption of a symbolic, sustainable boards strengthen this relationship. The results remained consistent following several robustness tests and endogeneity checks. The study mainly contributes to the literature by raising awareness about the relationship between CSR and tax avoidance. To the best of our knowledge, this is the first empirical study on the link between CSR decoupling and tax avoidance and the moderating effect of sustainable boards. Future research should determine the impact of the sub‐pillars of CSR decoupling and evaluate tax disclosure in CSR reports. Corporations should promote integrated tax and sustainability management as substantive stakeholder tools.

PurposePrevious studies on the relationship between corporate social responsibility (CSR) and tax avoidance (TA) have found inconclusive results. Academics have suggested deepening our understanding of this relationship. Although a few studies have responded to this call, research toward moderating variables is still nascent. The purpose of this study is to analyze the moderating role of economic freedom (EF) and its interaction with power distance (PD) on the relationship between CSR and TA.Design/methodology/approachBased on a sample of 3,866 publicly listed firms from 44 countries over the period 2010–2018, the authors use multivariate regressions techniques to investigate whether and how EF moderates the relationship between CRS and TA and how PD influences this effect.FindingsFindings indicate that the potentially positive relationship between CSR and TA is weaker for firms in institutional environments with higher EF. Moreover, we find that this moderating effect is stronger when PD is lower.Practical implicationsThis study has important implications. It offers insights for managers to reflect on their CSR and taxation practices, and for policymakers to consider the institutional conditions that facilitate corporations’ social and tax-responsible behavior. These findings indicate the necessity of integrating cultural, regulatory and collaborative elements to observe corporations engaged in social and tax-responsible behavior.Originality/valueTo the best of the authors’ knowledge, this is the first study to investigate the moderating effect of EF on the relationship between CSR and TA, and its interaction with PD. Moreover, our sample includes firms based in Europe, North and South America, Asia and Oceania, facilitating the study of EF and PD’s broad diversity.

The main focus of this research is to investigate how corporate social responsibility, influenced by corporate governance, impacts tax evasion. This study adopts a quantitative methodology. The sampling approach utilised was purposive, resulting in the selection of 23 companies from the Energy Sector of the Indonesia Stock Exchange. Secondary data was gathered through a review of existing literature. Path analysis, aided by the SmartPLS 4 software, was employed to assess both direct and indirect effects. The findings revealed that corporate governance has a favourable impact on corporate social responsibility and tax avoidance. Additionally, corporate social responsibility plays a role in mediating the relationship between corporate governance and tax avoidance.

In order to avoid tax reasonably, enterprises often take very complicated and opaque transactions. Because of the complexity and concealment of such transactions, tax avoidance not only helps enterprises reduce the tax burden, but also increases the degree of information asymmetry, which provides opportunities and conditions for the management rent-seeking behavior. As an important external corporate governance mechanism, investors’ site visit can effectively reduce the degree of information asymmetry and restrain managerial opportunism. What is the relationship between investors’ site visit and corporate tax avoidance? This paper selects A-share listed companies in Shanghai and Shenzhen from 2013 to 2015 as samples to investigate the impact of investors’ site visit on corporate tax avoidance. It is found that investors’ site visit can restrain corporate tax avoidance. When enterprises are under great pressure of performance, the restrain effect of investors’ site visit on corporate tax avoidance is significantly weakened. Further research finds that the higher the degree of information asymmetry, the more obvious the governance effect of investors’ site visit, and the better the restraining effect on corporate tax avoidance. Moreover, investors’ site visit can improve the quality of internal control, enhance the level of investor protection, and attract more analysts’ attention. The improvement of the quality of internal control and the level of investor protection can regulate the activities of the management, and more analysts’ attention also increases the cost of corporate tax avoidance, so as to achieve the purpose of curbing corporate tax avoidance.The separation of ownership and management makes it difficult for the owners of enterprises to obtain the real financial information timely and accurately. At present, the coverage of investors’ site visit is still not high, and investors have a little impact on corporate governance. With the gradual improvement of the interactive relationship platform for investors, the role of investors in the supervision and governance of information disclosure is gradually emerging. Further standardizing and developing the site visit platform is helpful to improve the level of corporate governance and alleviate the principal-agent problem of listed companies in China. This paper not only enriches the literature on the impact of investors’ site visit on corporate tax avoidance, but also provides empirical evidence and theoretical inspiration for actively promoting investors’ site visit. It also has certain reference value for assisting relevant departments to strengthen tax supervision and reduce tax loss. In addition, the tax avoidance activities adopted by the management when facing high pressure on performance are more covert and difficult to be discovered by investors. Investors can obtain private information through site visit and reduce the self-motivated tax avoidance activities by the management.

Smoke and mirrors: Corporate social responsibility and tax avoidance—A reply to Hasseldine and Morris

The analysis conducted on the relationship between Corporate Social Responsibility (CSR), Investment Opportunity, Profitability, and Tax Avoidance in Energy Sector Companies listed on the Indonesia Stock Exchange between 2017 and 2021 has yielded significant insights. While the influence of CSR on Tax Avoidance was found to be insignificant, both Investment Opportunity and Profitability demonstrated notable effects, with the latter displaying a negative influence. Furthermore, the combined impact of CSR, Investment Opportunity, and Profitability on Tax Avoidance was found to be substantial, explaining 63% of the observed variance. These findings underscore the intricate relationship between corporate practices, financial performance, and tax management strategies, offering valuable implications for various stakeholders. In light of these conclusions, several recommendations can be drawn. Firstly, collaboration between tax authorities and relevant stakeholders is essential to refine tax policies, integrating sustainability considerations and ensuring transparency in corporate tax practices. Secondly, investors should adopt a comprehensive approach when assessing investment opportunities, taking into account factors beyond financial performance, including corporate social responsibility and tax management strategies. Additionally, companies are encouraged to enhance their disclosure practices concerning CSR activities, thereby promoting greater transparency and accountability. Finally, future research efforts should focus on expanding the scope of analysis across different sectors and incorporating additional variables to deepen our understanding of tax avoidance dynamics in the Indonesian context. By implementing these recommendations, policymakers, tax authorities, investors, and corporate entities can collectively contribute to fostering a more responsible and sustainable business environment.