International Journal of Research and Innovation in Social Science (IJRISS) |Volume VI, Issue IX, September 2022|ISSN 2454-6186
CSR Practice and Tax Compliance: Is there a nexus between the two?
Itotenaan Henry Ogiri, PhD1, Augustar Omoze Ehighalua, PhD2, Hillary Ukachukwu Nosiri3
1Associate Professor of Accounting, Gregory University, Uturu, Nigeria
2PlusTheory Consultants, Abuja, Nigeria
3Doctoral Student, Ignatius Ajuru University of Education, Port Harcourt, Nigeria
Abstract: Taxation and Corporate Social Responsibility (CSR) are two areas that require organizations to demonstrate responsibility to the government and society. While tax is a legal requirement by firms to comply with established obligations, CSR is largely a voluntary practice. This paper investigated the relationship between the level of CSR practice and tax compliance amongst firms in Lagos State, Nigeria. The Shapiro-Wilk’s Lambda estimate, Kruskal-Wallis estimates, and the bivariate pairwise correlational matrix were used in the study. Furthermore, the SPSS software was used to analyze the data, while the study adopts the descriptive statistics method in presenting the empirical findings. Our study reveals varying relationships between the level of CSR practice and firms’ tax compliance as revealed by the rate of aggressive tax avoidance strategies adopted by firms. Majorly, our study shows that a negative connection exists between tax compliance and CSR. More specifically, Pearson’s correlation estimation provided that there is a significant negative relationship between company income tax (CIT) and CSR. Also, the study indicates a negative and statistically significant relationship between CSR and withholding tax (WHT), while the association between value-added tax (VAT) and CSR is negative but statistically insignificant. The study has implications for public policy formulation and implementation and recommends that governments should employ some enablers like tax holidays, tax havens, and other incentives alongside stronger enforcement mechanisms to drive tax compliance.
Keywords: Corporate Income Tax, CSR, Nigeria, Taxation, Withholding Tax, Value-added Tax
JEL Classification Codes: C12, C35, C83, E62, H2, H24
I. INTRODUCTION
Organizations exist in an environment with concomitant social, political, and economic makeups. Profits, values, and wealth that accrues to organizations are argued to have arisen from the environment to which they belong. It is fitting for such organizations to invest in things that are of interest to the host environment otherwise it will create an appearance of exploiting and plundering the environment instead of just doing business. Several factors of corporate social responsibility (CSR) have been raised in extant literature.
CSR is essentially a moral obligation. This obligation sometimes conflicts with the firms’ profitability objective. According to Gribnau (2015), companies endorsing CSR accept ethical obligations beyond compliance with the law. The sustained interest being shown by organizations in CSR is a continued attempt to satisfy the expectations of various