ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

CSRSubscribe to CSR

An Assessment of Mandatory Corporate Social Responsibility Expenditure

The response of firms towards the corporate social responsibility guidelines and its impact on the funding of Sustainable Development Goals is investigated.

Corporate Social Responsibility in India

Section 135 of the Companies Act, 2013 mandates companies with a particular turnover, networth, and net profit to spend 2% of their average net profit on corporate social responsibility, while Schedule VII of the act prescribes activities which shall be called as CSR activities. Within a span of six years, CSR rules have been amended multiple times and the central government has at different times added more activities, as well as two high-level committees on CSR. Is CSR in India facing a case of excessive overregulation, when it is basically voluntary in nature?

Tax Payment as a Social Responsibility

Firms can avoid taxes legally, even though it is well understood that tax payment is a fundamental and measurable behaviour towards society. In this paper, we elucidate such legal provisions in the Indian tax law and analyse tax payments with corporate social responsibility spending and find that firms spending more on CSR pay lower taxes. By employing fixed effects and quantile regression models to ascertain the impact of firm size on the effective tax rate using panel data for 1995–2017, we find that large firms’ effective tax rates are lower as compared to small firms. Moreover, the effective tax rate decreases with firm size. Large firms adopt more tax-aggressive policies and use various tax incentives to minimise their tax liability.
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