INTERNATIONAL JOURNAL OF ACCOUNTING, FINANCE AND TAXATION

AGGRESSIVE TAX PLANNING AS AN ENVIRONMENTAL, SOCIAL, AND GOVERNANCE RISK

Ogundeko Sodiq Temitayo, Yakubu Azeez Oluwanishola

February 3, 2026

Citation

INTERNATIONAL JOURNAL OF ACCOUNTING, FINANCE AND TAXATION , Vol. 3 (1) (2026) , pp. 35-50

Details

ISSN: 3027-0378
Published: February 3, 2026
Status: Published

Abstract

This study examined aggressive tax planning as an emerging environmental, social, and governance (ESG) risk, focusing on its implications for corporate governance, social responsibility, and environmental sustainability in Nigeria. Guided by two objectives, the research developed corresponding research questions and hypotheses. A descriptive and explanatory research design, combined with an ex-post facto approach, was employed to analyze fiscal policy and economic growth variables using data spanning 2010 to 2024. The study framework included independent variables such as Effective Tax Rate and Book Tax Differences, with Firm Size as a control variable, while Community Investment Intensity served as the dependent variable. Findings indicate that aggressive tax planning, particularly as measured by Book Tax Differences, negatively affects ESG-related outcomes, suggesting that firms engaging in tax avoidance may underinvest in socially responsible and environmentally sustainable initiatives. Conversely, a higher Effective Tax Rate and larger firm size were associated with moderately better ESG performance, highlighting the role of tax compliance and resource availability in promoting sustainable practices. The analysis also identified cross-sectional dependence and long-run cointegration among the variables, confirming that ESG performance and tax planning behaviors are interconnected across firms over time. Based on these insights, the study recommends that firms align their tax strategies with sustainable business practices by adhering to tax regulations and avoiding aggressive tax planning that could compromise ESG objectives.

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