Corporate Social Responsibility and Tax Aggressiveness

Abstract

This study aims to analyze the effect of corporate social responsibility on tax aggressiveness. Agency theory is used to explain the relationship between corporate social responsibility variables and tax aggressiveness. The relationship between principal and agent has different interests. The agent has more information than the principal, so opportunistic actions may occur by agents through tax aggressiveness; furthermore, agents use corporate social responsibility to hide these opportunistic actions. The research sample used is the annual financial statements of mining companies listed on the Indonesia Stock Exchange in 2013-2020. The results of the analysis of 96 samples show that corporate social responsibility has a negative and significant effect on tax aggressiveness. This means that the higher the company carries out corporate social responsibility activities, the smaller the company is willing to take tax aggressiveness actions. This shows that companies tend to avoid tax aggressiveness and comply more with applicable tax regulations to improve the company's image as obedient taxpayers. Although corporate social responsibility is bound by regulations, companies do not take advantage of it in terms of aggressive tax practices. Furthermore, the company shows a tendency to enforce the government's plan in terms of tax revenue along with the company's long-term goals. This study expands the focus of the literature on developed economies by examining the relationship between corporate social responsibility and corporate tax aggressiveness in an emerging Asian economic setting, namely Indonesia. It is also an empirical study that focuses on mining companies in Indonesia.