Exploring the Tax Avoidance–CSR Interplay: Insights from ESG Components

The interplay between corporate social responsibility (CSR) and tax avoidance has increasingly attracted attention for its ethical implications. Studies on the relationship between tax avoidance and CSR present a mixed picture, suggesting either a positive or negative association. Theoretical frameworks such as corporate culture theory (CCT), stakeholder theory (SKT), resource-based view (RBV), shareholder theory (ST), legitimacy theory (LT), and risk management theory (RMT) offer different perspectives on this relationship, complicating the understanding. Using ESG scores, this study examines the relationship between tax avoidance and CSR by investigating how tax avoidance is associated with the environmental, social, and governance components of CSR. The empirical analysis on a sample of US firms listed on NYSE and NASDAQ provides evidence that tax avoidance displays a positive correlation with the environmental and social components of ESG score, but not significant association with governance. The findings suggest that taxation may influence corporate behavior in specific CSR areas, such as environmental initiatives and social or philanthropic activities. The study underscores the need for further investigation into how CSR and tax avoidance influence each other. Practical implications that policymakers and stakeholders might use tax incentives to encourage ethical corporate practices aligned with sustainable management principles.