FNEGE Médias: Corporate Social Responsibility and Taxation – Research by Safa Gaaya and Fathen Lakha

In this paper, Safa Gaaya, Assistant Professor at EMLV, and Fathen Lakhal, Full Professor at EMLV, examine how corporate social responsibility (CSR) interacts with tax avoidance practices among French-listed companies. Their findings highlight a complex relationship shaped by governance, debt, and ownership structure.

At the intersection of financial strategy and societal expectations, taxation offers a concrete lens to analyse how firms align their commitments with their practices.

CSR and taxation: a tension between commitments and practices

Corporate social responsibility is often associated with ethical conduct and stakeholder engagement. In parallel, corporate tax avoidance refers to the use of legal mechanisms to reduce tax liabilities by exploiting regulatory gaps.

Taxation represents a high cost for firms, sometimes accounting for a substantial share of pre-tax income. This financial pressure encourages the development of optimisation strategies. At the same time, tax contributions support public goods, social systems, and economic development, placing tax behaviour within a broader societal debate.

From this perspective, CSR could be expected to limit aggressive tax practices. If paying taxes is considered part of a firm’s contribution to society, organisations with strong CSR commitments might align their fiscal strategies with these principles.

Empirical findings: CSR and tax avoidance can coexist

The research conducted by Safa Gaaya and Fathen Lakhal challenges this assumption. Based on a sample of French-listed companies from 2005 to 2017, the study finds that firms engaged in CSR are more likely to engage in tax avoidance.

This result suggests that CSR can function as a reputational mechanism. By investing in visible social or environmental initiatives, firms may offset the perception of more aggressive tax strategies. In this configuration, CSR contributes to legitimacy while financial optimisation continues in parallel.

The findings contribute to ongoing academic discussions about the role of CSR in corporate strategy. Rather than systematically reflecting ethical alignment, CSR may also serve as a tool within broader risk management approaches.

The role of governance and financial structure

The study highlights several moderating factors. Strong corporate governance mechanisms reduce the relationship between CSR and tax avoidance. Similarly, higher levels of debt introduce additional monitoring constraints that limit aggressive fiscal behaviour.

These elements indicate that internal control systems influence how CSR commitments translate into operational decisions. When oversight is reinforced, firms tend to align their practices more closely with declared principles.

Governance structures therefore play a central role in ensuring consistency between sustainability strategies and financial conduct.

Family ownership: a distinct approach to CSR and taxation

The research also identifies a specific pattern among family-owned firms. When these organisations invest in CSR, they are less likely to engage in tax avoidance practices.

This behaviour is linked to long-term considerations and the preservation of socio-economic wealth. Family firms often prioritise continuity and reputation across generations, which can lead to more cautious financial strategies.

In this context, CSR appears more closely aligned with underlying values, influencing both external communication and internal decision-making.

Implications for managers and regulators

From a managerial perspective, the study points to the importance of aligning governance structures with sustainability commitments. Strengthening internal controls can help ensure coherence between CSR policies and tax strategies, reduce reputational risks, and reinforce stakeholder trust.

For regulators, the findings underline the need for transparency and clarity in tax frameworks. Clear rules and monitoring mechanisms can contribute to a more balanced system, limiting aggressive practices while maintaining competitiveness.

Research at EMLV: analysing contemporary business challenges

This research reflects the positioning of EMLV’s Programme Grande École, which combines management, analytical approaches, and societal issues. By addressing topics such as taxation, governance, and CSR, faculty work contributes to a deeper understanding of how organisations operate in complex environments.

Learn more about research and the Master in Management programme and its specialisations in finance, governance, and sustainable management