How is corporate social responsibility a moderating variable in tax avoidance? A business strategy context

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Abstract

The primary objective of this study is to provide empirical evidence on the moderating role of corporate social responsibility (CSR) in the relationship between tax avoidance, firm size, and the capital intensity ratio (CIR). Prior research indicates that while firm size does not necessarily correlate with tax avoidance, higher CIR is often associated with greater tax avoidance efforts (Kalbuana et al., 2023; Zhang et al., 2022). This study aims to build on these insights by examining whether CSR influences these relationships, especially in the Indonesian corporate context. Data was collected from companies listed on the Indonesian Stock Exchange (IDX) between 2020 and 2022, covering both cyclical and non-cyclical sectors, resulting in 186 data points from 62 companies. A purposive sampling method and panel data regression techniques were applied, including Chow and Hausman tests using EViews 12.0 software. The findings reveal that while firm size shows no significant impact on tax avoidance, CIR positively influences it. CSR further strengthens the relationship between CIR and tax avoidance, while it mitigates the tax avoidance tendencies of larger firms. These results contribute to the understanding of CSR’s dual role in corporate tax strategies and offer insights for policymakers and researchers concerned with tax compliance and corporate governance.

Keywords: Capital Intensity Ratio, Firm Size, Tax Avoidance, Corporate Social Responsibility

Authors’ individual contribution: Conceptualization — L.K., M.M., and I.A.B.; Methodology — I.A.B. and I.I.; Writing — Original Draft — L.K., M.M., and I.I.; Writing — Review & Editing — I.A.B. and I.I.; Supervision — M.M. and I.A.B.; Project Administration — I.A.B. and I.I.; Funding Acquisition — L.K. and I.I.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: H26, M14, G38

Received: 24.08.2024
Revised: 01.11.2024; 25.03.2025
Accepted: 31.03.2025
Published online: 02.04.2025

How to cite this paper: Karlinah, L., Meutia, M., Hanifah, I. A., & Ismawati, I. (2025). How is corporate social responsibility a moderating variable in tax avoidance? A business strategy context. Corporate Governance and Sustainability Review, 9(1), 115–125. https://doi.org/10.22495/cgsrv9i1p10