The Relationship between ESG Activities and Corporate Tax Burden

[Purpose] We conduct the test by establishing a hypothesis that there would be no relationship between corporate ESG activities and corporate tax burden. The hypothesis of this study is based on the mixed research results between corporate ESG activities and tax avoidance. [Methodology] We set a sample targeting companies listed on KOSPI from 2016 to 2020. And we conduct a regression analysis of the empirical test model established based on previous research related to corporate tax burden. In addition, We classify ESG activity components and test the effect of each ESG activity component on corporate tax burden. We additionally test whether the effect of ESG activities on corporate tax burden differs depending on the size of the company. [Findings] It is found to have a positive (＋) relation between ESG activities and corporate tax burden. Among ESG activities components, social responsibility activities (ESG_S) and corporate governance improvement activities (ESG_G) are found to have a positive (＋) relation with corporate tax burden. It is judged that the positive (＋) relationship between ESG activities and corporate tax burden is shown in social responsibility (ESG_S) activities and corporate governance improvement activities (ESG_G). In the case of a relatively largesize company, ESG activities are found to have a positive (＋) relation with the corporate tax burden. This is found to be significant only in corporate governance improvement activities among the components of ESG activities. This is a consistent result even when measuring company size as a large conglomerate group. [Implications] This study has a contribution in that it presents data showing that ESG activities have an effect on corporate taxation. In addition, this study has a contribution in that, while the effects of corporate ESG activities on tax policy are mixed, we provide practical data that the effect of ESG activities on tax strategy may differ depending on the size of the company.