Beyond borders: Investigating how country progressiveness and governance shape the interconnection between corporate social responsibility and tax avoidance in European countries

This study investigates the nuanced relationship between corporate social responsibility (CSR) performance and tax avoidance (TA), emphasizing how country-level institutional factors—progressiveness and governance—moderate this association. Using a large panel of 9,031 firm-year observations from 27 European countries (2016–2022) and employing a multidimensional measure of TA, the analysis finds a consistent negative association between CSR and TA, supporting the transparent behavior hypothesis. However, this relationship is shaped by national context. In more progressive countries, CSR more effectively constrains visible TA practices but may fail to deter complex, opaque strategies, indicating partial decoupling. Paradoxically, in high-governance environments, CSR’s role weakens—suggesting that sophisticated legal frameworks may inadvertently enable firms to use CSR symbolically while engaging in strategic tax planning. This study contributes to the CSR–TA literature by employing a multidimensional approach to assess TA, capturing both visible and opaque tax behaviors. It integrates novel institutional moderators—country progressiveness and governance—and leverages the unique context of the EU to reveal how national conditions shape the alignment between CSR and corporate tax behavior. It highlights the importance of an ethical culture, institutional nuance, and regulatory context in fostering authentic CSR practices. Note: This paper is forthcoming in the Journal of International Accounting, Auditing and Taxation