The Impact of CSR on Tax Avoidance: The Moderating Role of Political Connections

Abdullah Munawir Almutairi () and Samir Ibrahim Abdelazim
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Abdullah Munawir Almutairi: Accounting Department, College of Business Administration, Majmaah University, Al-Majmaah 11952, Saudi Arabia
Samir Ibrahim Abdelazim: Accounting Department, College of Business Administration, Majmaah University, Al-Majmaah 11952, Saudi Arabia

Sustainability, 2024, vol. 17, issue 1, 1-20

Abstract: This paper investigates the association between corporate social responsibility (CSR) and tax avoidance (TA), with a particular focus on how political connections influence this relationship. The study examines non-financial companies listed on the Egyptian Exchange (EGX) over the period from 2017 to 2022, encompassing a final sample of 70 firms and 420 firm-year observations. Pooled Ordinary Least Squares (OLS) and fixed-effects regression methods are utilized for statistical analysis. The findings reveal a significant positive correlation between CSR activities and a higher degree of TA, suggesting that companies involved in CSR are more likely to engage in TA. Moreover, political connections are shown to have a moderating effect, further strengthening this relationship. To the authors’ knowledge, this research is one of the first attempts to explore the moderating influence of political connections on the CSR-TA relationship in an emerging market context. By doing so, it extends the debate in the literature regarding the negative role played by political connections in increasing TA in developing markets. Previous studies primarily focused on the direct link between CSR and TA, but this study sheds light on the nuanced interaction between these factors when political ties are considered.

Keywords: corporate social responsibility; tax avoidance; political connections; emerging economy; Egypt (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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