Tax Avoidance Strategies and Their Effect on Corporate Governance Structures

Abstract

This study investigates the relationship between tax avoidance strategies and corporate governance structures through a mixed-methods approach that integrates quantitative and qualitative analyses. Using firm-level data tax avoidance was measured through effective tax rates (ETR) and book–tax differences (BTD), while governance indicators included board independence, audit committee size, ownership concentration, and CEO duality. Regression models revealed a significant negative association between aggressive tax practices and governance strength, indicating that weaker monitoring mechanisms often coexist with higher levels of avoidance. Complementary qualitative interviews confirmed that executives often rationalize tax minimization as a fiduciary duty, while governance experts emphasized its ethical and reputational risks.The results demonstrated that firms with concentrated ownership and CEO duality were more likely to pursue aggressive avoidance, whereas independent boards and larger audit committees moderated such behavior. The analysis further highlighted that profitability can coexist with responsible tax strategies, suggesting that strong governance enables firms to achieve financial success without compromising ethical standards. By integrating agency, institutional, and stakeholder theories, the study underscores that governance not only influences tax outcomes but also shapes corporate legitimacy and long-term sustainability.The findings have important policy and managerial implications. Regulators should strengthen governance codes by embedding tax transparency as a key accountability mechanism, while boards and investors should view responsible taxation as part of sustainable value creation. Overall, the study concludes that corporate governance and tax avoidance are mutually reinforcing domains, where weak governance amplifies opportunistic avoidance and robust governance fosters transparency, accountability, and legitimacy.