Is There a Relationship Between Corporate SDG Involvement and Tax Avoidance?

Abstract

This study examines whether corporate involvement with the Sustainable Development Goals (SDGs) is associated with corporate tax avoidance (TA). Using a large international panel of publicly listed firms, we quantify SDG involvement through text analysis of sustainability and integrated reports, identifying explicit references to the SDGs. Tax avoidance is measured as a 3-year average difference between statutory and cash effective tax rates, based on standardized financial data. Pooled logistic regression models with country–year and sector fixed effects show a small but marginally significant positive association between SDG involvement and TA. A decomposition of the TA measure indicates that this association is driven by persistent differences between firms, while year-to-year changes within firms exhibit no detectable relationship. The effect size is economically limited but statistically robust. Overall, the results indicate that SDG communication and corporate tax behavior remain largely independent domains, even as global expectations for responsible corporate tax behavior continue to rise.