The Role of ESG Governance and Internal Control in Preventing Corporate Tax Fraud: Expert Perspectives

Abstract

Corporate tax fraud is a growing phenomenon not only in terms of legal control and audit but also in terms of corporate responsibility and stakeholder control. This study aims to describe how Environmental, Social, and Governance (ESG) governance and internal control mechanisms could work together to prevent companies’ tax fraud and improve tax behavior. The research was conducted using a qualitative methodology. The study involved 15 semi-structured interviews with experts in corporate taxation, auditing, control, and governance. The interviews were analyzed using Nvivo software. The results of the study revealed that ESG governance could improve the situation if it is integrated with tax responsibilities through the development of appropriate control mechanisms. They also showed that there is a significant decoupling risk between ESG goals and actual tax behaviors due to competing financial and managerial incentives. The analysis also revealed that the prevention of corporate tax fraud requires an ethical and accountable governance system, whistleblower policies, ESG disclosure mechanisms, and digital technologies. Such technologies as artificial intelligence could be used to improve monitoring and detect tax fraud in a timely manner. The research provides theoretical and practical contributions to the understanding of how to prevent corporate tax fraud by transforming ESG governance mechanisms and internal control systems. It also provides several suggestions for practitioners and policymakers in the field.