Abstract
Research Question: To what extent are ESG scores associated with corporate tax outcomes in the European Union, evaluated through the effective tax rate and its deviation from the statutory rate, after controlling for financial, institutional, and temporal factors?
Motivation: The increasing importance of ESG reporting has raised questions about whether companies with higher ESG scores also display different tax outcomes. In the European Union, where companies operate under different institutional and tax environments, but under a similar legislative context, understanding this association is relevant for both academic research and policy discussions.
Idea: The paper investigates whether ESG disclosure/performance, measured through the Refinitiv ESG score, is statistically associated with companies’ tax outcomes. Tax outcomes are assessed using two indicators: the effective tax rate, measured as GAAP_ETR, and the deviation from the statutory corporate tax rate, measured as Tax_Dev.
Data: The analysis is based on a panel dataset covering 7,020 firm-year observations from 1,097 companies located in 23 European Union member states, over the period 2013–2024. ESG scores and financial indicators are obtained from LSEG Data & Analytics (Refinitiv), while statutory corporate tax rates are collected from OECD database.
Tools: The data were analyzed in the SPSS program, using a linear mixed models with an autoregressive AR(1) structure, including fixed effects for country and year.
Findings: The main and lagged models do not show a statistically significant average association between ESG scores and tax outcomes. However, the Country × ESG interaction is statistically significant for both tax indicators in the full sample, indicating that the aggregate result conceals different national patterns. Profitability and leverage remain the most consistent firm-level correlates.
Contribution: The paper contributes to the literature on ESG and taxation by showing that ESG scores are not uniformly associated with corporate tax outcomes at EU level, while also identifying relevant cross-country heterogeneity. The findings underline the importance of financial characteristics, institutional settings, and time-specific factors when ESG and taxation are examined together.