International Journal of

Financial Studies

Article
The Influence of Social Responsibility Practices on Tax Planning:
An Empirical Study for Companies Listed on Euronext Lisbon
Pedro Ferreira Silva 1 , Cristina Sá 2 and Teresa Eugénio 2, *

1 ESTG—Escola Superior de Tecnologia e Gestão_Edifício D, Leiria Polytechnic, 2411-901 Leiria, Portugal;

[email protected]
2 CARME—Centre of Applied Research in Management and Economics, School of Technology and
Management, Polytechnic Institute of Leiria, 2411-901 Leiria, Portugal; [email protected]
* Correspondence: [email protected]

Abstract: This paper analyzes the influence of social responsibility practices on the development
of tax planning activities in companies listed on Euronext Lisbon. Although scientific research into
social responsibility and tax planning is not new, scientific studies into the relationship between
these two themes is a developing area of research that still raises many questions. This study was
carried out on a sample of 30 companies listed on Euronext Lisbon, using data for the 2018 and 2019
periods. The hypotheses were formulated based on a literature review on this subject. A multiple
linear regression model was developed to validate the hypotheses. The results show that the social,
corporate governance, environmental, or economic components of corporate social responsibility
do not influence tax planning. However, the results show that company size negatively impacts
tax planning, i.e., larger companies have lower effective tax rates. In the sample studied, larger
companies implemented more tax planning strategies. In this way, this study can complement the
understanding of the relationship between social responsibility practices and tax planning activities
in Portugal and internationally.

Keywords: tax planning; tax management; corporate social responsibility; Portugal

Citation: Silva, Pedro Ferreira,

Cristina Sá, and Teresa Eugénio. 2024.
The Influence of Social Responsibility
1. Introduction
Practices on Tax Planning: An Tax management is an activity that accompanies most companies. Every day, com-
Empirical Study for Companies Listed panies face countless challenges and a wide range of decision-making options, including
on Euronext Lisbon. International taxes. Taxes are a burden that reduces companies’ available resources, so it is important to
Journal of Financial Studies 12: 73. reduce the amount of tax paid as much as possible. According to Lopes (2018), companies
https://doi.org/10.3390/ijfs12030073 have legal options that give them a chance to opt for the least costly and most suitable
Academic Editor: Khaled Hussainey route for their organization, with the aim of reducing the amount of tax payable and, in
this context, applying tax planning strategies. This reduction could increase profitability
Received: 17 May 2024 for shareholders.
Revised: 10 July 2024
Social responsibility has accompanied companies over the last few decades. Through
Accepted: 19 July 2024
globalization, political, economic, cultural, and social issues are increasingly intertwined. Thus,
Published: 29 July 2024
corporate social responsibility (CSR) arises from the need for a responsible entrepreneurial
spirit, in line with the concept of sustainable development (Baylis and Smith 2005). It is crucial
for companies to be socially responsible and to create a positive impact for employees, the
Copyright: © 2024 by the authors.
community in general, and other stakeholders. The Commission’s Green Paper (European
Licensee MDPI, Basel, Switzerland. Commission 2001), in its internal and external dimensions, presents various measures
This article is an open access article that companies should adopt with a view to being socially responsible. Some of these
distributed under the terms and measures are a better balance between work, family life, and leisure time, the promotion
conditions of the Creative Commons of gender equality, the adoption of health and safety measures at work, the reduction in
Attribution (CC BY) license (https:// environmental impact, and having socially responsible practices towards stakeholders,
creativecommons.org/licenses/by/ among others. Laguir et al. (2015) and Valiente et al. (2012) state that CSR is a key factor
4.0/). influencing a company’s performance.

Int. J. Financial Stud. 2024, 12, 73. https://doi.org/10.3390/ijfs12030073 https://www.mdpi.com/journal/ijfs

Int. J. Financial Stud. 2024, 12, 73 2 of 19

The relationship between tax planning and social responsibility is most often realized
because taxes are an important funding source for public goods. Taxes are indispensable
for financing state social programs such as health, security, and education (Lanis and
Richardson 2012; Branco 2014, 2021). Consequently, companies need to manage the amount
of tax they pay without compromising the community.
The literature has highlighted the importance of this issue, both for the scientific
community and society in general. Hoi et al. (2013) state that corporate culture influences
CSR and that companies that are not socially responsible are more likely to have aggressive
tax planning practices. CSR may influence tax planning in terms of how a company organizes
itself and cares about the community’s well-being (Lanis and Richardson 2012). Kovermann
and Velte (2019) reflect on the impact of corporate governance on corporate tax avoidance.
Khan et al. (2014) state that many companies claim to be socially responsible when they
publish sustainability reports. However, these authors also point out that some companies
that consider themselves socially responsible use an aggressive tax planning policy and
resort to tax havens. Therefore, it is expected that socially responsible companies give back
to the community the fair share of their activities in the form of tax payments and do not
engage in aggressive tax planning (De Melo et al. 2020).
This research aims to study the influence of the different components of social re-
sponsibility on a company’s tax planning activities. The goal is to determine whether a
greater intensity of social responsibility’s social, corporate governance, environmental, and
economic components is associated with a greater or lesser level of aggressive tax planning.
This study was conducted on a sample of 30 companies listed on Euronext Lisbon for the
2018 and 2019 periods. The research hypotheses were studied using a linear regression model.
This topic has not been addressed in the literature in Portugal, so it is timely and
interesting to carry out this study. This research contributes to the existing literature in
this area of knowledge by providing an insight into this issue for Portuguese companies.
Also, we use different metrics to compute a tax planning variable developing different
models for analysis. We separately examine the effect of four categories of CSR on tax
planning. In addition, the work has the merit of being part of a multidisciplinary line of
research, demonstrating the interconnection between the areas of accounting and taxation
knowledge and contributing to a better understanding of company decisions.
This study is divided into five sections. It begins with the introduction. Section 2
presents the literature review, referring to the main measures of tax planning, the dimen-
sions of CSR, the results of various empirical studies on the influence of social responsibility
on tax planning, and the research hypotheses. Section 3 includes the research methodology,
the sample, the variables, and the multiple linear regression formulation. Section 4 presents
the results obtained and their discussion. The last section presents the final conclusions
and advice for future research lines.

2. Literature Review
2.1. Tax Planning
Tax planning is inevitably part of companies’ day-to-day operations. Taxes represent a
significant burden for companies, leading to reduced available resources.
Internationally, studies on tax planning tend not to separate the concepts of tax plan-
ning, tax evasion, and tax fraud. Lanis and Richardson (2012) and Laguir et al. (2015) use
the term “tax aggressiveness” to define all tax planning activities, whether they are legal,
illegal, or borderline.
Given the above, it is difficult to draw the line between the concepts of tax planning and
tax evasion, which is why the term “tax aggressiveness” encompasses both concepts. Slemrod
(2004) and Blouin (2014) point out that knowing when a given activity incurs aggressive tax
planning is complicated. For example, faced with dubious laws, which can be interpreted
differently, companies try to choose less fiscally damaging paths without incurring tax
evasion (Santos 2009). According to Blouin (2014), when companies are faced with a law of
dubious interpretation, they have no obligation to interpret the law in favor of the legislator.
Int. J. Financial Stud. 2024, 12, 73 3 of 19

Other authors take a different view of how companies minimize their taxes. For
Avi-Yonah (2008), a company has the right to reduce taxes within the spirit of the law. Still,
it is considered illegitimate for a company to engage in aggressive tax planning activities to
minimize taxes deliberately. According to the European Commission (2015), by carrying
out aggressive tax planning activities, companies exploit legal loopholes in tax systems
and mismatches between national rules to avoid paying their fair share of taxes. Several
authors state that aggressive tax planning can have a negative effect on the community
because if companies engage in tax evasion practices, governments will find it challenging
to guarantee public services such as education, health, or security (Freedman 2003; Slemrod
2004; Landolf 2006; Friese et al. 2008). Thus, illegal and tax evasion activities correspond to
aggressive tax planning and are considered socially irresponsible (Lanis and Richardson
2012). Over the last few decades, many scientific studies have been published on the
topics of tax planning and CSR practices. However, the topics have been approached
independently (Desai and Dharmapala 2006; Chen et al. 2010; Hanlon and Heitzman 2010;
Lanis and Richardson 2012; Landry et al. 2013; Whait et al. 2018), contrasting with the
joint approach of these two research areas. The main empirical studies linking these two
themes have been carried out in the last decade (Lanis and Richardson 2012, 2013, 2015;
Hoi et al. 2013; Laguir et al. 2015; Jones et al. 2016; Marta et al. 2019; Sari and Prihandini
2019; De Melo et al. 2020; Abdelfattah and Aboud 2020).
It should also be noted that the existing studies present contradictory results. Hoi et al.
(2013) and Laguir et al. (2015) found a positive relationship between CSR and tax planning.
On the other hand, Lanis and Richardson (2012) and Jones et al. (2016) found a negative
relationship. On the other hand, Marta et al. (2019) found no relationship between these
two variables. According to Lanis and Richardson (2012), a company with a better CSR
performance should have a less aggressive level of tax planning. On the other hand, these
authors state that companies that use tax havens are not socially responsible and, therefore,
have a more aggressive level of tax planning. Sikka (2010) says that some companies
use legitimacy theory when making CSR disclosures to gain legitimacy and influence the
community. On the contrary, Hoi et al. (2013) state that companies use CSR disclosures
publicly not to affect the community but to mitigate possible sanctions due to aggressive
tax planning strategies.
Over the last few decades, various authors and researchers have studied or developed
studies in which they apply measures to evaluate and quantify tax planning activities. One
of the first studies on tax planning measures was carried out by Shackelford and Shevlin
(2001). These measures include estimating the marginal tax rate, the specification of the
trade-off model, and implicit taxes. Other authors and researchers have subsequently
addressed these measures. Hanlon and Heitzman (2010) carried out a study in which they
defined twelve tax planning measures. Most of these measures deal with the Effective Tax
Rate (ETR) and the Book-Tax Difference (BTD).
According to Hanlon and Heitzman (2010), many existing studies on this subject use
accounting data, as these data, unlike tax returns, are disclosed to the market. Several mea-
sures of tax planning are used in the literature, as each measure has limitations, i.e., using
several measures makes the results more robust (Hanlon and Heitzman 2010; Lisowsky
et al. 2013; Hoi et al. 2013).
The BTD is a tax planning measure widely used in the literature. BTD is calculated as
the difference between book income and taxable income. One of the main limitations of
this way of measuring tax planning is that taxable income is generally estimated since tax
return data are not publicly available (Jones et al. 2016; Lisowsky 2010). Another limita-
tion, according to Martinez (2017), is that BTD can be justified by earnings management,
which makes it challenging to know when we are dealing with tax planning mechanisms.
Hoi et al. (2013) used BTD to measure aggressive tax planning.
The ETR is another of the tax planning measures used in the various scientific studies
on the subject (Lanis and Richardson 2012; Hoi et al. 2013; Laguir et al. 2015; Jones et al.
2016; Martinez 2017; Marta et al. 2019; Sari and Prihandini 2019; De Melo et al. 2020). Next,
Int. J. Financial Stud. 2024, 12, 73 4 of 19

we will analyze some of the main measures related to ETR, such as Current ETR, Cash ETR,
Generally Accepted Accounting Principles (GAAP) ETR, and Long-Run Cash ETR.
The Current ETR is a ratio made up of current taxes in the numerator and Earnings
Before Taxes (EBT) in the denominator. Therefore, as this ratio is composed only of current
taxes, it does not include deferred taxes. Thus, only permanent differences influence this
ratio, i.e., through items that only affect current tax. For Hanlon and Heitzman (2010), the
main disadvantage of this ratio is the possibility of it being influenced by accounting results
since the items that change the Current ETR are not temporary differences.
Cash ETR is a variable whose numerator is the amount of taxes paid and whose
denominator is EBT for a given period. As far as we know, among the measures related
to ETR, Cash ETR is the most widely used tax planning measure in the literature on the
influence of social responsibility on tax planning. For Hanlon and Heitzman (2010), this is
the most direct measure of the taxes actually paid. However, this is not one of the most
consensual measures in the literature, as it has several limitations. Hanlon and Heitzman
(2010) point out that volatility from year to year affects this measure more than Current
ETR and GAAP ETR. Another limitation for these authors is the possible incompatibility
between the numerator and denominator. The numerator could include operations from
previous years (for example, an audit completed in the current year but which had begun
in previous years), while the denominator only includes operations from the current year.
Blouin (2014) states that accruals affect the denominator, not the numerator. This limitation
led Dyreng et al. (2008) to calculate Cash ETR with adjustments. These authors remove
some special items from the denominator, such as restructuring reserves, gains from debt
extinguishment, and gains from discontinued operations.
The GAAP ETR variable is made up of income tax (current and deferred) in the
numerator and EBT in the denominator for a given period. This ratio follows current
accounting standards. For Hanlon and Heitzman (2010), the GAAP ETR includes deferred
taxes, so deferral strategies, such as accelerated depreciation rates, will not influence it.
When analyzing GAAP ETR, as with other measures related to ETR, the lower the ratio
value, the greater the level of aggressive tax planning by a company (Martinez 2017).
The Long-Run Cash ETR variable includes in the numerator the sum of the taxes paid
in a given number of years and in the denominator the sum of the EBT for the respective
number of years present in the numerator. According to Dyreng et al. (2008), the ideal time
horizon for this ratio is ten years. Thus, the Long-Run Cash ETR measures the long-term
effective tax rate. Several authors and researchers use the Long-Run Cash ETR. The main
advantage of this ratio is that accounting accruals do not influence it (Dyreng et al. 2008;
Hanlon and Heitzman 2010; Jones et al. 2016). In addition, Dyreng et al. (2008) use the
Long-Run Cash ETR, as this measure is less affected by annual variations in ETR. Although
they obtained inconclusive results, Jones et al. (2016) state that the higher a company’s CSR
index, the higher the value of the Long-Run Cash ETR ratio. Thus, companies with high
CSR ratios do not have aggressive long-term tax planning.

2.2. Corporate Social Responsibility (CSR)

Over the last few decades, various authors and researchers have contributed to the
development of the concept of CSR, such as Bowen (1953), McGuire (1963), Steiner (1971),
Davis (1973), Fitch (1976), Backman (1975), Epstein (1987), Carroll (1999), Schwartz and
Carroll (2003), and Carroll (2016), among others. In addition to the contribution of authors
and researchers, in the 21st century, international institutions and governments have
contributed to this issue. Take the example of the European Commission (2001), which
states in its Green Paper that “being socially responsible is not restricted to complying with
all legal obligations—it implies going further by investing ‘more’ in human capital, the
environment, and relations with other stakeholders”.
Carroll’s (1979) three-dimensional model is one of the main contributions to the
literature on corporate social responsibility in the 1970s. For Carroll (1979), the definition of
CSR has to include economic, legal, ethical, and discretionary responsibilities, which must
Int. J. Financial Stud. 2024, 12, 73 5 of 19

be fulfilled simultaneously. Economic responsibility is a company’s main responsibility.

Companies have to sell their goods or services in such a way that they make a profit. The
other responsibilities only exist if the economic responsibility is successful; otherwise, the
company cannot continue to operate. Carroll (1991) places economic responsibility at the
base of his pyramid, as this is what underpins the other responsibilities.
Legal responsibility means that companies have to comply with laws and regulations
in the course of their activities. Communities, therefore, expect businesses to make a profit
and companies to respect the law.
Ethical responsibility is present in economic and legal responsibility, as these respon-
sibilities incorporate ethical standards. However, some behaviors and activities are not
found in legislation but are expected by the community. Carroll (1979) considers that ethical
responsibilities are poorly defined and are the ones that companies find most difficult to
deal with. Carroll (1991) emphasizes that ethical responsibilities incorporate standards,
norms, or expectations that reflect concern for consumers, employees, shareholders, and
the community. For Carroll (2016), ethics benefits the pyramid, as it will be present in all
responsibilities. Prior research had joined and compared the ethical reasoning of private
sector tax practitioners, government revenue tax practitioners, and a non-tax (control)
group in both social and tax contexts (Doyle et al. 2022).
Discretionary responsibility corresponds to voluntary actions. Carroll (1979) points
out that it may not be correct to use the term responsibility for something that is voluntary
and at the discretion of each company. A company can carry out certain CSR activities not
provided for by law and for which the community does not have high expectations but will
benefit as a whole. Carroll (1991) mentions that an example of discretionary responsibility
is donations made by a company to charities or arts organizations.
Regarding the social issues involved, these are constantly evolving in response to the
community’s needs. For Carroll (1979), the social issues involved should address social,
environmental, and ethical issues. However, the main difficulty is that these differ from
sector to sector. For example, Carroll (1979) states that a financial institution is not under as
much pressure regarding environmental issues as a factory will be. Social issues should
also be identified as a fundamental aspect of corporate social performance (Carroll 1979).
Finally, Carroll (1979) identifies the last dimension of philanthropic responsibility,
which is based on being a good citizen. With this dimension, Carroll wants to draw
attention to the need for organizations to contribute to community resources and improve
the quality of life of the surrounding populations.
The European Commission has also defined the dimensions of CSR. It states that
“corporate social responsibility refers to actions taken by companies beyond their legal obli-
gations towards society and the environment. Certain regulatory measures can create more
favorable conditions for companies to voluntarily assume this responsibility” (European
Commission 2011, p. 4). According to the European Commission’s Green Paper (European
Commission 2001), CSR is divided into internal and external dimensions. The internal
dimension concerns socially responsible practices regarding a company’s employees. The
internal dimension addresses issues such as human resource management, health and
safety at work, adapting to change, and managing environmental impact and human
resources. The external dimension is about developing socially responsible practices by a
company regarding its stakeholders. Local communities, business partners, suppliers, and
consumers are the stakeholders referred to in the European Commission’s Green Paper
(European Commission 2001) regarding the external dimension. The external dimension
also highlights the importance of socially responsible practice in terms of human rights
and global environmental concerns. Different literature presents the classification of CSR
into several categories: economic, environmental, social, and corporate governance (Hoang
2018; Kocmanová et al. 2016; Martins et al. 2023; Kocmanová and Šimberová 2014; Laguir
et al. 2015). In this study, this classification is applied.
Int. J. Financial Stud. 2024, 12, 73 6 of 19

2.3. Tax Planning and Social Responsibility

CSR is used as an independent variable by several researchers in the study of the
influence of social responsibility on tax planning. Various strategies have been used to
measure this variable, ranging from the use of databases (e.g., KLD (Kinder, Lydenberg,
Domini & Co., Boston, USA) and VIGEO EIRIS) to the use of data extracted from reports
and accounts, environmental sustainability reports, and the companies’ websites (Wiseman
1982; Cho and Patten 2007; De Villiers and Van Staden 2011; Lanis and Richardson 2012).
Lanis and Richardson (2012) studied the relationship between social responsibility and
tax planning for companies listed on the Australian Stock Exchange from 2008 to 2009. Tax
planning was measured through two ETR-related measures: the GAAP ETR and the ratio
of income tax to operating cash flows. The components of social responsibility, business
strategy and CSR, personal strategy, social and environmental investment, clients and
suppliers, and community and political involvement were measured by extracting the data
disclosed by the companies in their reports and accounts or on their institutional websites.
The results obtained by Lanis and Richardson (2012) show a negative relationship
between CSR and tax planning, i.e., socially responsible companies have less aggressive tax
planning. A company’s commitment to social investment and corporate strategy (including
ethics and business conduct) are key elements of CSR that have a negative impact on tax
planning. Regarding the dependent variable GAAP ETR, the authors found a positive
relationship with return on assets (ROA).
Hoi et al. (2013) studied the relationship between CSR and tax planning for the US market
from 2003 to 2009. Tax planning was measured through BTD, temporary differences (Desai
and Dharmapala 2006), and permanent differences (Frank et al. 2009) between accounting
profit and taxable profit. These authors also used Cash ETR, accounting standard FIN 48,
and a regression defined by Wilson (2009) in relation to aggressive tax planning as a measure
of tax planning. The components of social responsibility used by Hoi et al. (2013) were
corporate governance, employee relations, environment, community, diversity, human rights,
and product quality and safety, which were measured using data extracted from the KLD.
The results of Hoi et al. (2013) show that companies with four or more irresponsible
CSR activities are more likely to use tax havens and have a greater permanent difference
between accounting profit and taxable profit (BTD). The results obtained by these authors
also show that companies with irresponsible CSR activities have more aggressive tax
planning and that corporate culture influences CSR.
Lanis and Richardson (2013) conducted an empirical study between legitimacy theory1
and social responsibility in companies in the Australian market from 2001 to 2006. The
sample of this study contains 20 companies that use aggressive tax planning and 20 others
that do not use an aggressive or illegal strategy regarding tax planning activities. Tax
planning was measured using data extracted from the Australian Stock Exchange and
the Australian Tax Office. Regarding social responsibility, this was measured through the
information disclosed by the companies in their reports and accounts.
The results of Lanis and Richardson (2013) show that there is a positive relationship
between tax planning and CSR and that the legitimacy theory is confirmed in the context
of a company’s tax planning. The results obtained by Lanis and Richardson (2013) contrast
with those obtained by the same authors one year earlier (Lanis and Richardson 2012), in
which there is a negative relationship between tax planning and social responsibility.
Laguir et al. (2015) studied how the different items of social responsibility affect tax
planning in relation to French publicly traded companies for the period 2003–2011. Tax
planning was measured through BTD, and two measures related to ETR were used, which
followed the study by Lanis and Richardson (2012). The CSR’s social, environmental,
economic, and corporate governance components were measured using data provided by
the VIGEO EIRIS database.
The results obtained by Laguir et al. (2015) show that a company’s tax planning
depends on the nature of the CSR activities and that companies with better financial results
have less involvement in social responsibility activities related to the corporate governance
Int. J. Financial Stud. 2024, 12, 73 7 of 19

component. Larger companies are less likely to engage in aggressive tax planning activities
and are more involved in activities that promote CSR. According to these authors, the
higher the score of the indicators associated with the social component, the lower the level
of aggressive tax planning. Conversely, the lower the score on the economic dimension
indicators, the higher the level of aggressive tax planning. Finally, the results of Laguir et al.
(2015) show no correlation between tax planning and the environmental and corporate
governance components of CSR.
Lanis and Richardson (2015) studied the performance of CSR in the tax planning of
companies in the US market for the period 2003–2009. Tax planning was measured by ETR,
BTD, and Tax Dispute, which was taken from the KLD database. The CSR components of
community relations, corporate governance, diversity, employee relations, environment,
human rights, and products were measured using data provided by the KLD database.
The results show that the higher the level of CSR performance, the lower the likelihood of
tax evasion, and socially responsible companies resort to tax evasion less. Regarding the
components of CSR, the community relations and diversity component reveals particularly
important elements of CSR performance that reduce tax evasion.
Jones et al. (2016) studied the relationship between tax planning and CSR in more
than 30 countries in 2014. The authors grouped the countries into four large regional
groups: North America, Europe, Asia and Oceania, and the United Kingdom. Current ETR,
Cash ETR, and Long-Run Cash ETR measured fiscal planning. The CSR’s environmental,
social, and corporate governance components were measured using data extracted from
the VIGEO EIRIS database.
The results show a strong negative relationship between CSR and the variable that
measures tax planning, i.e., a high CSR is associated with a lower tax burden and, there-
fore, greater tax planning. Corporate culture influences aggressive tax planning, and the
relationship between aggressive tax planning and social responsibility is higher in Asia
and lower in the remaining group of countries. Regarding tax planning measures, the
Current ETR has a positive relationship with the corporate governance component and
no relationship with the environmental and social components. Cash ETR has a positive
relationship with the environmental component and no relationship with the social and
corporate governance components. The results of Jones et al. (2016) also show a lack of
a relationship between the control variables, ROA, company size and financial leverage,
and tax planning. In short, the study by Jones et al. (2016) obtained contradictory results
compared to the study by Lanis and Richardson (2012).
Marta et al. (2019) studied the relationship between social responsibility and tax
planning for American companies listed on the NYSE and NASDAQ from 2002 to 2006. Tax
planning was measured by Cash ETR. The environmental, social, and corporate governance
components of social responsibility were measured using data obtained from the Thomson
Reuters ESG Scores database.
The results obtained by Marta et al. (2019) indicate that, in general, no evidence was
found of a relationship between tax planning and social responsibility. However, through a
quartile regression, they found statistical evidence of a relationship between tax planning
and CSR at high levels of CSR, consistent with risk management theory. Finally, the theory
of legitimacy in a company’s tax planning is confirmed.
Sari and Prihandini (2019) studied the relationship between tax planning and social
responsibility in companies listed on the Indonesian stock exchange from 2016 to 2017. Tax
planning was measured through the Current ETR. These authors only use the environ-
mental, social, and economic components of social responsibility as independent variables,
measured through the sustainability reports provided by the Global Reporting Initiative.
The results obtained by Sari and Prihandini (2019) show that tax planning has a
positive relationship with the economic component of CSR and a negative relationship
with the social and environmental components of CSR.
De Melo et al. (2020) studied the influence of social responsibility on tax planning for
companies in the Brazilian market from 2010 to 2018. Tax planning was measured using
Int. J. Financial Stud. 2024, 12, 73 8 of 19

the Current ETR. The social, environmental, and corporate governance components were
measured using data obtained from the Thomson Reuters ESG Scores database.
The results of De Melo et al. (2020) indicate a positive relationship between the social,
environmental, and corporate governance components of CSR and tax planning. Socially
responsible companies, regardless of their size, have a lower level of aggressive tax planning.
Given the literature review presented, we are led to formulate the following hypotheses:

Hypothesis 1: Tax planning is influenced by the social component of CSR.

Hypothesis 2: Tax planning is influenced by the corporate governance component of CSR.

Hypothesis 3: Tax planning is influenced by the environmental component of CSR.

Hypothesis 4: Tax planning is influenced by the economic component of CSR.

The various empirical studies on the influence of social responsibility on tax planning
have used control variables. This study used the following control variables: company size,
financial leverage, capital intensity, ROA, and the ratio between a company’s market value
and book value.
ROA corresponds to the ratio between net profit for the period and total assets. The
results show a positive relationship between ROA and tax planning in the studies by Lanis
and Richardson (2012), using Cash ETR as a measure, and by Hoi et al. (2013), using BTD
and the regression defined by De Melo et al. (2020) as a measure. On the other hand, there is
a negative relationship between these two variables in the studies by Hoi et al. (2013), using
Cash ETR as a measure of tax planning, and by Marta et al. (2019). Regarding the studies
by Jones et al. (2016) and Lanis and Richardson (2012), using the ETR ratio between income
tax and operating cash flows, there is no relationship between ROA and tax planning.
We therefore formulated the following research hypothesis:

Hypothesis 5: Tax planning is influenced by the return on assets.

The company size variable is operationalized by the natural logarithm of total assets.
The results of the studies show that there is no consensus on the definition of the sign for the
relationship between company size and tax planning. Hoi et al. (2013) found contradictory
results when using various tax planning measures. When using the regression, there is a
positive relationship between company size and tax planning. However, if tax planning
is measured by BTD, there is a negative relationship. On the other hand, tax planning
measured by Cash ETR shows no relationship with company size. Laguir et al. (2015) and
Lanis and Richardson (2015) show a positive relationship between company size and tax
planning, which leads to larger companies being more socially responsible. On the contrary,
the study by De Melo et al. (2020) highlights a negative relationship between company
size and tax planning, which suggests that larger companies have more aggressive tax
planning, as the Current ETR ratio is lower. Lanis and Richardson (2012), using Cash ETR
as a measure of tax planning, and Lanis and Richardson (2013) and Jones et al. (2016) found
no relationship between these two variables.
Given the above, the following research hypothesis is formulated:

Hypothesis 6: Tax planning is influenced by company size.

Financial leverage corresponds to the ratio of non-current liabilities to total assets

(NCL/TA). Lanis and Richardson (2012), using Cash ETR as a measure of tax planning,
and Lanis and Richardson (2015) found a positive relationship between financial leverage
and tax planning, which shows that indebted companies have a less aggressive level of
tax planning. In contrast, Lanis and Richardson (2012), when using the ETR as a measure
of tax planning, which corresponds to the ratio between income tax and operating cash
Int. J. Financial Stud. 2024, 12, 73 9 of 19

flows, Lanis and Richardson (2013), Laguir et al. (2015), and Marta et al. (2019) found no
relationship between financial leverage and tax planning.
Given the above, the following research hypothesis is formulated:

Hypothesis 7: Tax planning is influenced by financial leverage.

3. Research Methodology
The research methodology adopted in this work is based on a quantitative analy-
sis, supported by the development of multiple linear regression. We intend to investi-
gate whether the components of social responsibility influence corporate tax planning.
In addition to the variables related to social responsibility, the study will include control
variables—in particular, ROA, company size, and financial leverage.

3.1. Sample and Data Collection

The sample for this study covers companies listed on the Euronext Lisbon stock
exchange between 2018 and 2019. During the analysis period, 39 companies were identified,
from which those with a negative net profit and those with negative income tax were
excluded. The final sample was 30 companies; 9 companies were excluded. Companies
whose ETR was negative or had a value greater than 1 were also excluded from the analysis.
These procedures are in line with those of other authors (Lanis and Richardson 2012; Hoi
et al. 2013; Laguir et al. 2015; Marta et al. 2019).
The data were collected by manual extraction from the annual reports and accounts,
some with integrated reporting of the companies in the sample for the period under analysis.
In addition, data were collected on the components of social responsibility by consulting
the information available on the companies’ respective institutional websites.

3.2. Variables
3.2.1. Dependent Variable
The regression model developed has tax planning as its dependent variable. The tax
planning variable will be operationalized by the concept of ETR, determined through three
alternative variables: Current ETR, Cash ETR, and GAAP ETR. Current ETR results from
the ratio between the value of current taxes and profit before tax. Cash ETR is calculated as
the ratio between the amount of taxes paid and profit before tax. GAAP ETR results from
the ratio between the amount of estimated income tax and profit before tax. The option of
measuring tax planning with three variables to measure ETR has the advantage of using
alternative measures that overcome the limitations of each of them, which allows for better
validation of the results obtained. The data will be taken from the financial statements of
each company.

3.2.2. Independent Variables

The independent variables are made up of the social responsibility components and a
set of control variables.
Social responsibility was analyzed in terms of four components: social, corporate
governance, environmental, and economic components, following the study by Laguir
et al. (2015). The social component covers human resources, community involvement, and
human rights indicators. The economic component addresses business ethics indicators.
The environmental and corporate governance components address environmental and
corporate governance indicators, respectively. Each component is made up of several
indicators, which in turn are assessed by a set of items. The result of each indicator is the
average of the items that make it up.
The values for each indicator that makes up the different components of social respon-
sibility were collected based on a manual analysis of the companies’ annual reports with
integrated reporting, in line with Lanis and Richardson (2012). The score for each indicator
was assessed through a content analysis, identifying keywords related to the indicators. In
Int. J. Financial Stud. 2024, 12, 73 10 of 19

this way, each item is classified with scores from 0 to 3 in relation to what each company
discloses in its reports and accounts. A score of 0 applies to companies that do not address
a particular item, while a score of 1 refers to a small reference to a specific item. On the
other hand, a rating of 2 corresponds to the existence of several references to a given item,
which is evidence of the companies’ concern with this issue. A rating of 3 is considered
quite satisfactory, meaning that the information disclosed by the companies places a lot
of emphasis on this item, which shows that they are proactive. Table 1 summarizes the
components, indicators, items, and keywords used, which were the basis for constructing
the working tool used to collect the data.

Table 1. Components, indicators, items, and keywords on social responsibility for CSR.

Components Indicators Items Keywords

Career
• Career management and job Progression
promotion Remuneration
• Quality of remuneration systems Salaries
Human
• Improved health and safety Health
Resources
conditions Safety
• Employee training Training
• Other Employees
Human Resources
Development
Social
• Promotion of social and economic Economic
development impact
SOCIAL Community • Social impact of the company’s Product
COMPONENT involvement products/services Service
• Contribution to causes of general Society
interest Community
Donations
Interest

• Respect for fundamental human

rights Human rights
• Non-discrimination and promotion Equality
Human Rights
of equal opportunities and Gender equality
diversity Discrimination
• Other

• Balance of power and efficiency of

the board of directors Corporate
CORPORATE • Audit and internal control
Corporate Governance
GOVERNANCE • Transparency and integration of
governance Auditing
COMPONENT CSR criteria in executive Internal Control
remuneration
• Other
Environment
• Environmental strategy Pollution
• Pollution prevention and control Impact
ENVIRONMENTAL (air, water, biodiversity) Air
Environment
COMPONENT • Management of environmental Water
impacts and energy use Biodiversity
• Other Energy
Renewable

• Product safety Safety

• Responsible information to Product
ECONOMIC
Business Ethics customers and suppliers Customer
COMPONENT
• Prevention of corruption Suppliers
• Other Corruption.
Source: Adapted from Laguir et al. (2015).

ROA is calculated as the ratio between the net income for the period and a company’s
total assets. A higher ROA may be associated with more aggressive tax planning (Jones
et al. 2016). Lu et al. (2014) and Margolis and Walsh (2003) found a positive relationship
Int. J. Financial Stud. 2024, 12, 73 11 of 19

between ROA and tax planning. However, Hamid et al. (2011) found a negative relationship
between ROA and tax planning. The literature thus shows evidence that is unclear about
the effect of ROA on tax planning.
Company size is measured by the natural logarithm of total assets. Lanis and Richard-
son (2012), Hoi et al. (2013), and Jones et al. (2016) point out that larger companies may
have more resources to engage in aggressive tax planning. Laguir et al. (2015) also state that
large companies are subject to greater public scrutiny and consequently incur a “political
cost” in the form of higher ETRs and a less aggressive level of tax planning. For Lanis
and Richardson (2012) and Johnson and Greening (1999), company size has a positive
relationship with tax planning.
Financial leverage is calculated as the ratio of non-current liabilities to total assets
(NCL/TA). Jones et al. (2016) state that higher financial leverage is usually related to
aggressive tax planning. According to Gupta and Newberry (1997) and Hoi et al. (2013),
leveraged companies will have low values in the ratios related to ETR and may incur
aggressive tax planning. Thus, one of the reasons why there is a negative relationship
between tax planning and leverage is due to tax-deductible interest payments (Laguir et al.
2015; Lanis and Richardson 2012).
Table 2 summarizes the variables used in the linear regression model developed,
indicating their measure and the respective calculation.

Table 2. Measurement of dependent and independent variables.

Variable Measure Calculation

Current ETR Current taxes
EBT
Tax planning Cash ETR Paid taxes
EBT
GAAP ETR Income tax
ROA
Average of human resources indicator items:
Social component
community involvement and human rights.
Corporate Social Corporate governance component Average of the corporate governance indicator items.
Responsibility Environmental component Average of the environmental indicator items.
Economic component Average of the items in the business ethics indicator.
Net profit for the period
Return on assets Return on assets TA
Company size Company size Ln Log of TA
Financial leverage Financial leverage NCL
TA
EBT—Earnings Before Taxes; ROA—Return on assets; NCL—Non-current liabilities; TA—Total assets.

3.3. The Linear Regression Model

A multiple linear regression model was developed to test the hypotheses defined, as
shown in Equation (1). This model was developed based on validation assumptions, which
allow us to study whether or not there is a linear relationship between the chosen variables.
TPi = β0 + β1 ROAi + β2 CSi + β3 FLi + β4 Social CSRi + β5 Corporate governance CSRi + β6
(1)
Environmental CSRi + β7 Economic CSRi + εi
where
TPi = Company i tax planning.
β0 = y-intercept.
βj (j = 1, . . . 7) = Partial slopes, i.e., variation in tax planning i per unit of variation in
each independent variable.
ROAi = Company i return on assets.
CSi = Company i size.
FLi = Company i financial leverage.
Social CSRi = Company i Social CSR component.
Int. J. Financial Stud. 2024, 12, 73 12 of 19

Corporate governance CSRi = Company i Corporate Governance CSR component.

Environmental CSRi = Company i Environmental CSR component.
Economic CSRi = Company i Economic CSR component.
εi = Error term.
The tax planning variable was operationalized by three different measures, leading to
the development of three multiple linear regression models. Model 1 uses Current ETR as
the measure of tax planning, model 2 uses Cash ETR, and model 3 uses GAAP ETR.

4. Results and Discussion

Table 3 provides Pearson correlation coefficients considering the dependent variable
Current ETR. Pearson’s correlation makes it possible to check the intensity and direction of
the linear correlation/association between the variables. Thus, in the sample under study,
there are moderate correlations between current ETR and ROA (coefficient of −0.277).

Table 3. Pearson correlation coefficients.

Current Corporate Environmental Economic

ROA CS FL Social CSR
ETR Governance CSR CSR CSR
Current ETR 1
ROA −0.277 * 1
CS −0.250 −0.263 1
FL −0.162 0.015 −0.046 1
Social CSR 0.138 −0.413 ** 0.426 ** −0.066 1
Corporate
−0.107 −0.123 0.250 0.083 0.110 1
governance CSR
Environmental CSR −0.066 −0.258 0.602 ** 0.226 0.759 ** 0.214 1
Economic CSR −0.119 −0.173 0.451 ** 0.084 0.685 ** 0.296 * 0.735 ** 1
The significance levels are indicated by * and **, which represent the 5% and 1% level, respectively.

There are also moderate correlations between Social CSR and ROA (coefficient of
−0.413) and Social CSR and company size (coefficient of 0.426). There is a strong correlation
between Environmental CSR and company size (coefficient of 0.602), Environmental CSR
and Social CRS (coefficient of 0.759), Economic CSR and Social CRS (coefficient of 0.685),
and Economic CSR and Environmental CRS (coefficient of 0.735).
Consequently, there are no strong correlations between the independent variables that
could influence the results obtained.
The descriptive statistics for the variables included in the study are shown in Table 4.
Regarding the tax planning variable, we can see that the average Current ETR and
Cash ETR are not very different, with the Cash ETR (0.1897) being higher. We can, therefore,
consider that, on average, the current tax and the amount of tax paid by a company are
close since they correspond to 18.01% and 18.97% of a company’s ETR. In the case of GAAP
ETR, the average value is higher at 0.2317. This value is explained by the fact that as well
as including current tax in this measure, we also included deferred taxes. Most of the
companies in our sample have deferred tax liabilities, which leads to an increase in the tax
value. Thus, on average, 23.17% of the ROA corresponds to the value of income tax.
Regarding the independent variables, the components of social responsibility, the
component with the highest level of performance is corporate governance. These figures
can be explained by the fact that, in their annual reports, companies give great prominence
to the corporate governance report, compared to environmental or social information.
As a result, the values are more homogeneous in the corporate governance component
and more dispersed in the environmental component. It should also be noted that the
environmental component has the greatest total amplitude. The total amplitude of this
component is 3 (maximum value, as the scale is from 0 to 3), which reveals a huge difference
between companies’ treatment of environmental aspects in the integrated reports and
Int. J. Financial Stud. 2024, 12, 73 13 of 19

accounts. As a result, some companies fully disclose environmental information, while

others do not address the issue in their integrated reports and accounts by not disclosing
the sustainability report.

Table 4. Sample descriptive statistics.

N Average SD Minimum Maximum

Current ETR 51 0.1801 0.1480 0.0028 0.5823
Cash ETR 51 0.1897 0.1825 0.0017 0.8868
GAAP ETR 51 0.2317 0.1723 0.0043 0.8790
ROA 51 0.0739 0.0918 0.0043 0.4790
CS 51 20.9823 2.0161 16.5395 25.1256
FL 51 0.3418 0.2338 0.0018 1.3729
Social CSR 51 1.8841 0.5928 1 0.38 2.76
Corporate
51 2.1569 0.3040 1.50 2.75
governance CSR
Environmental CSR 51 1.6912 0.9508 0.00 3.00
Economic CSR 51 1.9706 0.5377 0.50 2.75
SD—standard deviation; ROA—return on assets; CS—company size; FL—financial leverage. 1 The calculation of
this item concerns the average standard deviation of the human resources, community involvement, and human
rights indicators.

Regarding ROA, the ratio between the net profit for the period and assets had a
minimum of less than 1% and a maximum of approximately 48%. The company size
variable shows a big difference in the size of the companies in the sample, which leads to a
higher standard deviation. Finally, financial leverage shows that, on average, the NCLs of
the companies in the sample correspond to 34.18% of the total value of assets. The value of
the financial leverage ratio is quite different between the companies in the sample. Thus,
some companies have much lower NCLs than assets, while others have higher NCLs than
assets, which, in the latter case, leads to negative equity.
Pearson’s linear correlation coefficient shows several positive and statistically signif-
icant correlations between most of the components of social responsibility. Thus, these
results indicate that companies with high CSR values do so in their various components.
There is a positive and moderate correlation between the size of a company and the social,
corporate governance, and economic components and a positive and strong correlation with
the environmental component. Thus, larger companies tend to be more socially responsible.
On the other hand, companies with a higher ROA tend to be less socially responsible.
The multiple linear regression model was estimated by the least squares method, using
the Enter method as the variable selection method.
In developing the linear regression, we validated the assumptions of its application.
The Kolmogorov–Smirnov test, which is the most appropriate for the sample size, shows
that the residuals of the Current ETR and GAAP ETR models have a normal distribution,
while the residuals of the Cash ETR model do not. The analysis of the scatter diagrams
validates the assumption of homoscedasticity and the absence of autocorrelation between
the predicted values (standardized) and the residual values (standardized). The scatter
diagrams show that the variance in all the models is approximately constant since the
residuals are distributed more or less randomly around zero. In addition, the residuals do
not show an increasing or decreasing trend, which could compromise the homoscedasticity
of the residuals. Another condition that the residuals meet is that they do not show a certain
pattern (such as being shaped like a parabola), which would compromise the linearity
hypothesis. Thus, the residuals in the scatterplot appear more or less randomly distributed,
which leads us to believe that there is no relationship between them, so they are assumed
to be independent.
Int. J. Financial Stud. 2024, 12, 73 14 of 19

The regression coefficients obtained for each independent variable, which allow us to
write the adjusted model, are shown in Table 5.

Table 5. Regression coefficients, p-value of Student’s t-test, and respective conclusions.

Current Etr Cash Etr Gaap Etr

Coefficient 0.874 0.715 0.783
Constant
p-value 0.006 0.067 0.036
Coefficient −0.468 −0.516 −0.557
ROA p-value 0.060 0.097 0.061
Influence No No No
Coefficient −0.030 −0.022 −0.026
CS p-value 0.025 0.176 0.100
Influence Yes No No
Coefficient −0.108 −0.012 −0.113
FL p-value 0.266 0.920 0.332
Influence No No No
Coefficient 0.059 0.100 0.062
Social CSR p-value 0.353 0.212 0.411
Influence No No No
Coefficient −0.007 −0.100 0.054
Corporate
p-value 0.924 0.254 0.513
governance CSR
Influence No No No
Coefficient 0.021 0.008 0.020
Environmental
p-value 0.635 0.890 0.705
CSR
Influence No No No
Coefficient −0.062 0.000 −0.099
Economic CSR p-value 0.289 0.998 0.161
Influence No No No
ROA—return on assets; CS—company size; FL—financial leverage.

The coefficient of determination obtained for the estimated model (R2 = 0.263). When
we consider the adjusted coefficient of determination (R2a = 0.143), we can say that 14.3%
of the total variability in tax planning is explained by the independent variables in the
adjusted linear regression model.
The linear regression model obtained can only be used to infer functional relationships
between tax planning and the independent variables if a number of assumptions are
met, namely, that the errors/residuals have a normal distribution with a zero mean and
constant variance and are independent and random and that the independent variables are
orthogonal, i.e., they are not correlated or, at most, show weak correlations (Marôco 2014).
Thus, using the Kolmogorov–Smirnov and Shapiro–Wilk tests, the normal probability graph
(QQ-plot of the residuals), the scatter diagram between the predicted values (standardized)
and the residual values (standardized), and the variance inflation factors (VIF) obtained for
each of the independent variables, we concluded that the model’s assumptions were met.
Hypothesis 1 aims to test whether the social component of CSR influences tax planning.
In all the models, the p-value of the Student’s t-test is higher than the significance level
considered (0.05). Thus, the social component of CSR does not influence tax planning,
leading us to reject the hypothesis. This result may be due to the low variability of the
tax planning variables supported by the low value of the standard deviation. This means
that most of the companies in our sample have tax planning values close to the average.
The result may derive from the set of indicators used to measure the social component of
social responsibility insofar as these are not reflected in the companies’ tax management
policy. Our study is in line with the research by Jones et al. (2016) since they found no
correlation with the social component. On the other hand, our study contrasts with those of
Laguir et al. (2015) and De Melo et al. (2020), as these authors found a positive relationship
Int. J. Financial Stud. 2024, 12, 73 15 of 19

between tax planning and this component. Sari and Prihandini (2019) found a negative
relationship between the social component of CSR and tax planning.
Hypothesis 2 sought to ascertain whether the corporate governance component of
CSR influences tax planning. In our study, we reject hypothesis 2, which means that the
corporate governance component does not influence tax planning. The results of Jones et al.
(2016), using Current ETR as the dependent variable, and De Melo et al. (2020) differ from
ours, as they obtained a positive relationship. However, when analyzing the results of Jones
et al. (2016) using Cash ETR as the dependent variable, the results are similar to ours since
there is no relationship between the corporate governance component and tax planning. Our
results regarding hypothesis 2 also corroborate the research by Laguir et al. (2015).
Hypothesis 3 sought to test whether the environmental component of CSR influences
tax planning. We reject hypothesis 3, meaning that the environmental component does
not influence tax planning. Our study is in line with the research by Jones et al. (2016)
and Laguir et al. (2015) using Current ETR as the dependent variable. On the contrary,
Jones et al. (2016), using Cash ETR as the dependent variable, and De Melo et al. (2020),
found a positive relationship between tax planning and the environmental component of
CSR. In contrast, Sari and Prihandini (2019) found a negative relationship between these
two variables.
Hypothesis 4 aimed to test whether the economic component of CSR influences tax
planning. As with the other components, the economic component does not influence tax
planning. Regarding this component, the study by Laguir et al. (2015) contrasts with ours
since they found a negative and statistically significant relationship between tax planning
and the economic component of CSR. On the other hand, Sari and Prihandini (2019) found
a positive relationship between these two variables.
Hypothesis 5 sought to ascertain whether ROA influences tax planning. As with the
components of social responsibility, in our study, ROA does not influence tax planning.
Our study corroborates the results of Lanis and Richardson (2015) and Jones et al. (2016) for
both the dependent variable Current ETR and the variable Cash ETR. Lanis and Richardson
(2012) obtained contradictory results to ours, as they found a positive relationship between
these two variables when using Cash ETR as a measure of tax planning. On the other hand,
Hoi et al. (2013), using Cash ETR as a measure of tax planning, and Marta et al. (2019)
found a negative relationship between tax planning and ROA.
Hypothesis 6 aims to test whether tax planning is influenced by company size. Regard-
ing this hypothesis, using Cash ETR and GAAP ETR as the dependent variable, company
size does not influence tax planning. Our results for these two dependent variables are
in line with research by Lanis and Richardson (2012) and Hoi et al. (2013), using Cash
ETR as a measure of tax planning, as well as research by Lanis and Richardson (2013)
and Jones et al. (2016). However, when we use Current ETR as the dependent variable,
we obtain a negative relationship between company size and tax planning. Thus, as a
company’s size increases, its effective tax rate will be lower. Marta et al. (2019) also found
a negative relationship between company size and tax planning. Laguir et al. (2015) and
Lanis and Richardson (2015) obtained contradictory results to ours since they found a
positive correlation between tax planning and company size.
Hypothesis 7 sought to ascertain whether tax planning is influenced by financial
leverage. Our results show that there is no correlation between financial leverage and tax
planning. Our study corroborates the findings of some leading authors and researchers
who have conducted studies on the influence of social responsibility on tax planning (Lanis
and Richardson 2013; Laguir et al. 2015; Jones et al. 2016; Marta et al. 2019). A positive
relationship between financial leverage and tax planning was obtained in the studies by
Lanis and Richardson (2012), using Cash ETR as a measure of tax planning, and by Lanis
and Richardson (2015).
The results we obtained may be the consequence of the low variability of the tax
planning variables, supported by the low value of the standard deviation. This means
that most of the companies in our sample have tax planning values close to the average.
Int. J. Financial Stud. 2024, 12, 73 16 of 19

Another reason for the obtained results can derive from the set of indicators used for
measuring the independent variable insofar as these are not reflected in the companies’ tax
management policy. It is possible that Portuguese tax system tax benefits or tax options do
not contain a strong relation with the variables applied in the regression model or that the
possible benefits do not have a strong impact on financial statements. We cannot rule out
the possibility that the official reports, specifically those of a non-financial nature, of the
companies in our sample do not clearly and visibly reflect their position on sensitive issues.

5. Conclusions
The influence of social responsibility practices on companies’ tax planning activities
is a pertinent topic for a better understanding of business management practices. The
relationship between tax planning and CSR is most often related to the “moral obligation”
to pay taxes to society. The use of aggressive tax planning by companies is considered
socially irresponsible (Lanis and Richardson 2012).
In carrying out this research, we wanted to develop a study that would guide the
behavior of companies in Portugal on the influence that each component of social responsi-
bility has on tax planning activities.
The study focused on a sample of companies listed on the Euronext Lisbon stock ex-
change for 2018 and 2019. The research hypotheses were validated using a linear regression
model. The tax planning variable was operationalized using three options: Current ETR,
Cash ETR, and GAAP ETR. Variables were defined for the CSR’s social, corporate gover-
nance, environmental, and economic components. The study also included the following
variables: ROA, company size, and financial leverage.
In hypothesis 1, we tested whether the social component of CSR influences tax plan-
ning. The results show no correlation between tax planning and the social component of
CSR. Hypothesis 2 sought to ascertain whether the corporate governance component of
CSR influences tax planning. The results show that there is no influence of the corporate
governance component of CSR on tax planning. Hypothesis 3 sought to ascertain whether
the environmental component of CSR influences tax planning, while hypothesis 4 sought to
test whether the economic component of CSR influences tax planning. The results show that
CSR’s environmental or economic components do not influence tax planning. In hypothesis
5, we found no correlation between ROA and tax planning. Regarding hypothesis 6, we
wanted to check whether a company’s size influences tax planning. When we used the
Cash ETR and GAAP ETR variables as a measure of tax planning, we found no relationship
between company size and tax planning. However, if we use the Current ETR variable, the
results show a negative influence of company size on tax planning, meaning that bigger
companies are associated with a higher level of tax planning. In the case of hypothesis 7,
we tested whether tax planning is influenced by financial leverage. However, the financial
leverage variable did not influence tax planning.
In our opinion, this study has two particular limitations. The first refers to the size of
the sample, with a final number of observations of 51. It would be advisable to increase
the number of observations and the time horizon in the future. The second concerns the
manual collection of information on the different components of CSR. This analysis could
lead to some subjectivity in the content analysis. We also believe that many companies are
not yet concerned with disclosing some aspects of CSR that they actually practice. This
limitation could be overcome if specific databases existed in Portugal with information on
companies’ social responsibility practices, as is the case in other countries (e.g., the KLD or
VIGEO EIRIS databases).
This research has highlighted the importance of disclosing CSR practices and ensuring
that companies do not miss out on the tax benefits associated with good CSR practices. The
conclusion that the different components of CSR do not influence the level of tax planning
may be due to the low use of the tax benefits in force.
Int. J. Financial Stud. 2024, 12, 73 17 of 19

A suggestion for future research is to carry out a new study for the Portuguese market
after the COVID 19 pandemic period, which can be compared to ours and which shows the
differences between the pre- and post-pandemic periods.

Author Contributions: Conceptualization, C.S., P.F.S. and T.E.; methodology, C.S., P.F.S. and T.E.;
software, P.F.S.; validation, C.S. and T.E. formal analysis, C.S., P.F.S. and T.E.; investigation, P.F.S.;
resources, C.S., P.F.S. and T.E.; data curation, C.S. and P.F.S.; writing—original draft preparation, P.F.S.;
writing—review and editing, C.S.; visualization, C.S. and P.F.S.; supervision, C.S. and T.E.; project
administration, C.S. and T.E.; funding acquisition, C.S. and T.E. All authors have read and agreed to
the published version of the manuscript.
Funding: This research is financed by National Funds of the FCT-Portuguese Foundation for Science
and Technology within the project «UIDB/04928/2020» and, under the Scientific Employment
Stimulus-Institutional Call CEECINST/00051/2018.
Informed Consent Statement: Not applicable.
Data Availability Statement: The data presented in this study are available on the website of
the companies.
Conflicts of Interest: The authors declare no conflict of interest.

Note
1 According to Conceição et al. (2011), the theory of legitimacy demonstrates the concern of companies with adjusting their actions
and activities towards the community while respecting its values and principles.

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