Examining the effect of corporate social responsibility and audit quality on corporate tax aggressiveness

Purpose: This paper investigates the effect of corporate social responsibility and audit quality on corporate tax aggressiveness. Design/methodology/approach: The authors employed a panel data set from 2011 to 2020 using firms listed on the Ghana Stock Exchange. The results were estimated using the fixed effect model estimator. Findings: The results of the fixed effect model reveal that although entities engage in corporate social responsibility (CSR) activities to improve the welfare of society, some of these entities have ulterior motives to use these CSR activities to engage in corporate tax aggressiveness (CTA), thereby reducing the amount of tax payable to the state. The results also confirm that entities trade-off tax payments for CSR, proving that, on average, CSR and tax payment act as substitutes rather than being complementary. The findings demonstrate that the extent to which entities use CSR to reduce the amount of tax payable to the tax authorities depend on management’s perception of the quality of the audit carried out on the financial affairs of the corporate entities. Originality/value: To the best of our knowledge, this study is the premier one investigating how CSR and audit quality affect the CTA of firms operating in Ghana.