Transforming Our World, or Their Tax Rates? The Relation Between Corporate SDG Engagement and Tax Avoidance

Corporate tax payments are vital for governments and public goods, yet tax avoidance remains widespread. Prior research on the link between corporate sustainability and tax avoidance is inconclusive, partly due to measurement issues. This study introduces engagement with the Sustainable Development Goals (SDGs) as an alternative framework, focusing on contexts where firm and government interests align. Using stakeholder theory, we examine whether firms with stronger social SDG engagement show less tax avoidance. Analyzing 1,966 firms (9,562 observations, 2015–2022), we find no significant relationship under normal conditions. However, during the COVID-19 pandemic—when interests aligned more closely—higher social SDG engagement is linked to lower tax avoidance, especially with strong governance. These results suggest firms often decouple SDG engagement from tax behavior in normal times, but crises can drive closer alignment.