Social and ethical factors versus tax fraud: the role of corporate social responsibility in the Romanian context

Abstract

Purpose Tax evasion and tax avoidance consistently strip national budgets of tremendous financial resources. Consequently, the discussion on tax fraud remains topical and a moving target subject matter. Various antecedents and moderators of tax fraud have been investigated over the years, yet the literature dedicated to the linkage between corporate social responsibility (CSR) and tax practices exhibited ambiguous results. In this respect, the purpose of this study is to present the results of an investigation into the nonfinancial factors affecting tax fraud and the moderating effect of CSR-related behaviors. Design/methodology/approach Structural equation modeling (SEM) was applied in a multivariate statistical analysis technique to analyze structural relationships. The measurement and structural models were evaluated using component-based partial least squares (PLS), a rigorous statistical instrument. The opportunity to use PLS-SEM is supported by the advancement of models comprising both reflective and formative constructs as in the present case. Findings Data collected from a sample of 290 respondents from Romania confirmed that social and ethical factors significantly impact tax fraud and CSR-related behaviors. In addition, the latter plays a moderating effect between nonfinancial factors and tax fraud. Research limitations/implications The research sample is country-centric (i.e. subjects come from Romania) while the questionnaire-based survey relies on self-reported measures. Originality/value The paper adds new evidence to the extant knowledge and points to theoretical and managerial implications.