Abstract
Purpose: Using listed firms domiciled in the founding BRICS countries, i.e., Brazil, Russia, India, China, and South Africa, this study empirically examines the impact of corporate social responsibility (CSR) engagement on the degree of tax avoidance.
Design/methodology/approach: Data used in this study is sourced from the EIKON database, where CSR variables, i.e., the scores of social and environmental pillars, are extracted from ASSET4, and accounting variables are sourced from Worldscope. We use a series of fixed effects regression models as the baseline approach to test the hypotheses. In addition, the 2SLS regression model is employed to address endogeneity issues.
Findings: Our results show that firms domiciled in BRICS countries do not use CSR strategically as "a tool" to legitimate themselves, manage their risks, or minimize public scrutiny from their tax avoidance behavior, but that they develop a culture of tax compliance and CSR engagement as a complementary strategy, promising ethical conduct to external audiences and committing to serving the interests of all stakeholders.
Originality/Value: This study incrementally contributes to the extant literature on the link between tax avoidance and CSR engagement by offering evidence from dominant emerging markets, where the institutional factors differ considerably from those of developed countries. Furthermore, we provide essential insights for policymakers that including responsible tax payment as part of the global CSR agenda may motivate firms to align their behaviors to tax payment.