ISSN: 2225-8329
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This study examines the interrelationships among corporate social responsibility (CSR), capital structure, governance architecture, profitability and tax avoidance among product-based and service-based small and medium-sized enterprises (SMEs) in Europe and the Economic Community of West African States (ECOWAS). Drawing on legitimacy, stakeholder and agency perspectives, the study develops an integrated framework incorporating direct, mediation and moderation effects. A quantitative explanatory research design is adopted using firm-level secondary data, with partial least squares structural equation modelling (PLS-SEM) employed to estimate the hypothesised relationships. Bootstrapping procedures are used to assess the significance of direct and indirect effects, while predictive relevance and robustness analyses are undertaken to evaluate model stability. The findings indicate that CSR and governance architecture significantly reduce tax avoidance, whereas capital structure and profitability significantly increase tax avoidance. Profitability significantly mediates the relationships between CSR, capital structure, governance architecture and tax avoidance, indicating the coexistence of ethical and economically driven tax-planning mechanisms. Firm size significantly strengthens the effects of CSR, capital structure and governance architecture, while firm age significantly alters these relationships. Interest-rate and exchange-rate conditions also moderate the relationships between the principal explanatory variables and tax avoidance. Significant sectoral and regional heterogeneity is observed, with CSR and governance effects generally stronger among service-based SMEs and European SMEs, while leverage-related tax avoidance is more pronounced among ECOWAS SMEs. The study contributes to the literature by reconceptualising SME tax avoidance as a multidimensional phenomenon shaped by corporate responsibility, governance, financial incentives and contextual conditions. The findings have implications for tax authorities and SME managers seeking to strengthen responsible tax behaviour through integrated governance, CSR transparency and financial oversight.
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