Integrated Reporting Quality, Tax Avoidance, and Sustainable Development: Evidence from South Africa

This study examines the association between Integrated Reporting (IR) quality and tax avoidance among South African listed firms from 2012 to 2021, and whether this relationship differs across the highest and lowest levels of IR quality. The extent to which the adoption of a Combined Assurance (CA) model strengthens the IR monitoring role in reducing tax avoidance, as well as the IR quality link with ESG-related implications of tax avoidance, are also explored. IR quality is directly derived from the EY Excellence in Integrated Reporting Awards ranking. This ranking evaluates firms’ adherence to the IR framework and is thus employed as a comprehensive proxy for IR quality. Tax avoidance is captured through multiple proxies. The main findings reveal no significant overall association between IR quality and tax avoidance, suggesting a decoupling between IR and tax behavior. However, when examining firms at the highest and lowest levels of IR quality, a significant negative relationship emerges only for the top performers (highest IR quality), indicating that IR constrains tax avoidance only when supported by a strong ethical corporate culture. Firms adopting CA exhibit higher tax avoidance, suggesting that IR and CA may be constrained by underlying corporate culture and used symbolically. Higher IR quality is also associated with lower tax avoidance relative to GDP and reduced potential revenue losses relative to government expenditures on education, health, and environmental protection. These findings contribute to the literature on IR, corporate governance, and tax avoidance, while also informing policymakers and regulators on the need to strengthen IR and CA frameworks through enhanced tax transparency requirements, thereby supporting equitable resource mobilization, institutional trust, and long-term sustainable development.