CSR performance and tax aggressiveness : evidence from Malaysia : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Accountancy at Massey University, Manawatu Campus, New Zealand

Abstract

Globally, government debt has risen substantially, and the need to increase revenue to meet society's needs has become paramount, yet some companies are tax aggressive. Drawing upon shareholder and stakeholder theories, this thesis examines the relationship between CSR performance and tax aggressiveness using 556 observations spanning from 2008 to 2021. The study applies a quantitative research method using regression analysis to test the hypotheses. To gain a deeper understanding of which specific dimension of CSR performance (environmental, social or governance) influences tax aggressiveness, this thesis delves into exploring the connection between the individual dimension of CSR performance and tax aggressiveness. To overcome the limitations of prior studies, the thesis also examines the effect of the Sustainability Reporting Guide (SRG) and FTSE4Good Bursa Malaysia (F4GBM) on CSR performance and tax aggressiveness of Malaysian public listed companies. The thesis results reveal a significant finding. There is a positive relationship between CSR performance and tax aggressiveness, suggesting that socially responsible companies in Malaysia engage in tax aggressiveness and do not consider tax as part of CSR performance. Instead, companies view tax and CSR performance as substitutes and perceive reductions in tax payments through tax aggressiveness as a means to generate more profits. This allows them to invest in innovation, create job opportunities, and contribute directly to societal well-being while meeting shareholders' expectations of profit maximisation. The results also show that different dimensions of CSR performance relate differently to tax aggressiveness. Environmental performance exhibits an insignificant relationship, while governance and social dimensions show positive relationships. Further, the study shows that the introduction of SRG and the presence of the F4GBM index, to some extent, affects the relationship between CSR performance and tax aggressiveness. The results suggest that firms adopting SRG and listing in the F4GBM index recognise the importance of meeting the needs of their different stakeholders beyond the needs of shareholders, thus mitigating the positive relationship between CSR performance and tax aggressiveness. The study contributes to the literature on CSR performance by unravelling the overarching influence of CSR performance on tax aggressiveness. The study shows that Malaysian companies view tax and CSR performance as having a substitutive relationship, indicating that they prioritise the interests of shareholders over broader stakeholder considerations. The key contribution is the examination of SRG and F4GBM on the relationship between CSR performance and tax aggressiveness. It provides insights into the role of regulatory pressure and the effect of compliance on the SRG and corporate reputation through listing in the (F4GBM) Index on the relationship between CSR performance and tax aggressiveness of Malaysian companies. Additionally, the study provides evidence on how each dimension of CSR performance contributes to shaping tax aggressiveness, covering an expansive timeframe, thus providing a unique and comprehensive view of the evolution of CSR performance and its correlation with tax aggressiveness.