Does Corporate Social Responsibility Expenditure Influence Tax Avoidance? Evidence from Tanzanian Listed Firms

Abstract

This study examines the relationship between corporate social responsibility expenditure and tax avoidance in Tanzanian listed firms, utilising secondary data from 25 firms listed on the Dar es Salaam Stock Exchange over a ten-year period from 2013 to 2022. Employing a retrospective research design and purposive sampling, we applied the fixed effects model as the estimation technique. The analysis reveals a positive and significant association between corporate social responsibility expenditure and tax avoidance, indicating that firms with higher levels of corporate social responsibility expenditure are more likely to engage in tax avoidance practices. Furthermore, control variables such as firm size, profitability, and leverage also demonstrated positive and significant relationships with tax avoidance. The findings contribute to the understanding of the intricate dynamics between corporate social responsibility initiatives and tax management strategies in the Tanzanian context. The implications of this study extend to policymakers, suggesting the need for a nuanced approach to corporate tax regulation, taking into account the interplay between corporate social responsibility initiatives and tax management practices. Policymakers should recognise that firms engaging in higher corporate social responsibility activities may employ tax planning strategies that warrant attention in regulatory frameworks. This study contributes to the ongoing discourse on the complex dynamics between corporate social responsibility and financial decision-making in emerging market contexts.