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

Zineb  El Idrissi; Hafsa  El Kadiri; Hajar  Tabyaoui; Anas  Azenzoul; Nacer Mahouat

doi:10.48161/qaj.v6n4a2661

Authors

Zineb El Idrissi Center for Studies and Research in Engineering and Organization Management, SUP2I, Hassan II University of Casablanca, Casablanca 20190, Morocco;
Hafsa El Kadiri Higher Institute of Engineering and Business (ISGA), Joint Unit: Entrepreneurship and Territorial Innovations (UMEIT), Cadi Ayyad University, Marrakech 40000, Morocco;
Hajar Tabyaoui Laboratory of Economics and Management, Multidisciplinary Faculty of Khouribga, Sultan Moulay Slimane University, Khouribga 25000, Morocco;
Anas Azenzoul INREDD Laboratory, Department of Management Science, Faculty of Legal, Economic and Social Sciences, Cadi Ayyad University, Marrakech 40000, Morocco; https://orcid.org/0009-0003-3159-7137
Nacer Mahouat PRISM Laboratory, Department of Management Science, Casablanca Higher School of Technology, Hassan II University of Casablanca, Casablanca 20000, Morocco. https://orcid.org/0009-0009-2041-7528

DOI:

https://doi.org/10.48161/qaj.v6n4a2661

Keywords:

ESG governance, Internal control, Corporate tax fraud, Tax compliance, Managerial opportunism, Institutional decoupling, Whistleblower, Artificial intelligence.

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.

Downloads

Download data is not yet available.

References

Abd Aziz, M. A., Ab Rahman, H., Alam, M. M., & Said, J. (2015). Enhancement of the accountability of public sectors through integrity system, internal control system and leadership practices: A review study. Procedia Economics and Finance, 28, 163–169.

Al-Khleifat, S., Abu Siam, Y., Nassar, M., & Sharairi, M. H. (2024). Determinants of tax decisions in Jordan: Income and sales auditor perspective. Journal of Risk and Financial Management, 17(12), 579.

Alshira'h, A. F. (2025). Do corporate governance, internal control and economic determinants matter? Value added tax non-compliance from perspective of external auditors: Jordanian evidence. International Journal of Ethics and Systems. Advance online publication.

Ashbaugh-Skaife, H., Collins, D. W., Kinney, W. R., & Lafond, R. (2009). The effect of SOX internal control deficiencies on firm risk and cost of equity. Journal of Accounting Research, 47(1), 1–43.

Azenzoul, A., Mahouat, N., El Gharbaoui, O., Tayazime, J., Moussaid, A., & Mokhlis, K. (2026). FinTech integration and tax compliance: A systematic literature review of risk, criminal justice challenges, and due process implications. Journal of Risk and Financial Management, 19(7), 457.

Azenzoul, A., Mahouat, N., & Mokhlis, K. (2026). Artificial intelligence and corporate governance: Strengthening oversight mechanisms to mitigate tax avoidance. Corporate Governance: The International Journal of Business in Society, 1–27.

Azenzoul, A., Mahouat, N., Vandapuye, S., Nait Slimane, S., Jbene, M., & Mokhlis, K. (2026). From predictive accuracy to algorithmic justice: Mapping the multidimensional impact of AI in tax auditing. Journal of Risk and Financial Management, 19(5), 354.

Azenzoul, A., & Mokhlis, K. (2025). Les facteurs affectant la performance du contrôle fiscal : Revue de littérature. International Journal of Accounting, Finance, Auditing, Management and Economics, 6(11), 347–365.

Azenzoul, A., & Mokhlis, K. (2025). L’impact de la digitalisation sur la performance de l’administration fiscale : Cas de la Direction générale des impôts. Revue du contrôle, de la comptabilité et de l’audit, 9(4), 1–27.

Azenzoul, A., Nait Slimane, S., Dridat, M., Elouidani, R., Mahouat, N., & Mokhlis, K. (2026). CEO psychology and corporate tax aggressiveness: Expert-based qualitative evidence from Morocco. Environment and Social Psychology, 11(2), ESP-4522.

Bauer, A. M. (2016). Tax avoidance and the implications of weak internal controls. Contemporary Accounting Research, 33(2), 449–486.

Bauer, A. M., Fang, J., Pittman, J. A., Zhang, Y., & Zhao, Y. (2020). How aggressive tax planning facilitates the diversion of corporate resources: Evidence from path analysis. Contemporary Accounting Research.

Benkraiem, R., Uyar, A., Kılıç, M., & Schneider, F. (2021). Ethical behavior, auditing strength, and tax evasion: A worldwide perspective. Journal of International Accounting, Auditing and Taxation, 43, 100380.

Chouaibi, J., Rossi, M., & Abdessamed, N. (2021). The effect of corporate social responsibility practices on tax avoidance: An empirical study in the French context. Competitiveness Review: An International Business Journal.

Col, B., & Patel, S. (2019). Going to haven? Corporate social responsibility and tax avoidance. Journal of Business Ethics, 154, 1033–1050.

Cortesi, A., & Vena, L. (2019). Disclosure quality under integrated reporting: A value relevance approach. Journal of Cleaner Production, 220, 745–755.

Desai, M. A., & Dharmapala, D. (2009). Corporate tax avoidance and firm value. The Review of Economics and Statistics, 91(3), 537–546.

Deslandes, M., Fortin, A., & Landry, S. (2019). Audit committee characteristics and tax aggressiveness. Managerial Auditing Journal.

Dewani, S., & Setiyawati, H. (2025). Tax digitalization and cooperative compliance: A trust-mediated model of tax compliance. Jurnal Ilmiah Akuntansi Kesatuan, 13(4), 955–960.

Gallemore, J., & Labro, E. (2015). The importance of the internal information environment for tax avoidance. Journal of Accounting and Economics, 60(1), 149–167.

García-Meca, E., Ramón-Llorens, M., & Martínez-Ferrero, J. (2021). Are narcissistic CEOs more tax aggressive? The moderating role of internal audit committees. Journal of Business Research, 129, 223–235.

Gharrafi, M., Fellah, I. B., Loubna, A., Mahouat, N., & Abderrahim, B. E. N. L. A. K. O. U. I. R. I. (2024). Exploring the external factors affecting the effectiveness of internal audit in Moroccan public enterprises with commercial activities: A qualitative approach. Edelweiss Applied Science and Technology, 8(6), 7419–7429.

Gharrafi, M., Mahouat, N., Mohammed, K., Kobi, H., Abderrahim, B., & Souad, H. (2024). The importance of good corporate governance practices and internal audit in the prevention of fraud: The case of Moroccan public enterprise [L'importance des pratiques de bonne gouvernance et de l'audit interne sur la prévention de la fraude: Cas des entreprises publiques marocaines]. HAL Open Science.

Ghoul, S. E., Guedhami, O., Kim, Y., & Yoon, H. (2026). Tax avoidance and ESG disclosure mandates: International evidence. Journal of International Business Studies.

Bimo, I. D., Prasetyo, C. Y., & Susilandari, C. A. (2019). The effect of internal control on tax avoidance: The case of Indonesia. Journal of Economics and Development, 21(2), 131–143.

Hanlon, M., & Slemrod, J. (2009). What does tax aggressiveness signal? Evidence from stock price reactions to news about tax shelter involvement. Journal of Public Economics, 93(1–2), 126–141.

Harasheh, M., & Provasi, R. (2023). A need for assurance: Do internal control systems integrate environmental, social, and governance factors? Corporate Social Responsibility and Environmental Management, 30(1), 384–401.

Hu, C., & Xiong, J. (2025). ESG disclosure and corporate payroll tax compliance. Emerging Markets Finance and Trade, 62, 1843–1863.

Li, Q., Maydew, E. L., Willis, R. H., & Xu, L. (2022). Taxes and director independence: Evidence from board reforms worldwide. Review of Accounting Studies, 28, 910–957.

Liu, D., & Chen, J. (2026). Interplay between internal control and tax regulation mechanisms on corporate tax avoidance. International Review of Economics & Finance, 105428.

Mahouat, N., Azenzoul, A., Benlakouiri, A., & Mokhlis, K. (2025). Contribution de la transformation digitale à l’amélioration de la qualité de l’audit externe dans les établissements publics : Étude qualitative dans le contexte marocain. Alternatives Managériales Economiques, 7(4), 107–130.

Mahouat, N., Azenzoul, A., Nait Slimane, S., Es-Sanoun, M., Mokhlis, K., & Jbene, M. (2025). Corporate governance and tax aggressiveness: The moderating role of audit quality. Journal of Risk and Financial Management, 19(1), 10.

Mahouat, N., & El Gharbaoui, O. (2024). Proposal for a conceptual model on the role of digitalization in improving external audit quality.

Mahouat, N., Gharrafi, M., Wissa, H., Rachida, B., Abdelaziz, B., & Zaim, M. (2024). Impact of cooperation between internal and external auditors on internal audit effectiveness in Moroccan public companies: Analysis using the structural equation modeling (SEM). Pakistan Journal of Life and Social Sciences, 22(2), 7046–7059.

Mansour, M., & Alomair, M. (2026). Institutional quality, ESG performance, and aggressive tax planning in developing countries. Sustainability.

Marques, M., Montenegro, T. M., & Brás, F. (2023). Tax avoidance and corporate social responsibility: A meta-analysis. The Journal of the American Taxation Association.

Menicacci, L., & Simoni, L. (2024). Negative media coverage of ESG issues and corporate tax avoidance. Sustainability Accounting, Management and Policy Journal.

Miceli, M. P., Near, J. P., & Dworkin, T. M. (2008). Whistle-blowing in organizations. Routledge.

Mitroulia, M., Chytis, E., Kitsantas, T., Skordoulis, M., & Kalantonis, P. (2025). ESG strategy and tax avoidance: Insights from a meta-regression analysis. Journal of Risk and Financial Management.

Nayyef, Y. H. (2026). The role of environmental, social, and governance (ESG) accounting disclosure in enhancing tax planning and corporate governance: An applied study on industrial sector companies in Salah Al-Din Governorate. Academia Open, 11(1), 10–21070.

Near, J. P., & Miceli, M. P. (1985). Organizational dissidence: The case of whistle-blowing. Journal of Business Ethics, 4, 1–16.

OECD. (2021). Behavioural insights for better tax administration: A brief guide. OECD Publishing.

OECD. (2021). Building tax culture, compliance and citizenship: A global source book on taxpayer education (2nd ed.). OECD Publishing.

OECD. (2022). Building trust to reinforce democracy: Main findings from the 2021 OECD survey on drivers of trust in public institutions. OECD Publishing.

OECD. (2022). Tax policy and gender equality: A stocktake of country approaches. OECD Publishing.

Russo, K. (2019). Superiority of the VAT to turnover tax as an indirect tax on digital services. National Tax Journal, 72(4), 857–880.

Saleh, M., Amin, H. M. G., & Elamer, A. A. (2025). Corporate social responsibility, tax behavior, and institutional context: An empirical analysis. Corporate Social Responsibility and Environmental Management.

Wahyuni-TD, I. S., Haron, H., & Fernando, Y. (2021). The effects of good governance and fraud prevention on performance of the zakat institutions in Indonesia: A Sharīʿah forensic accounting perspective. International Journal of Islamic and Middle Eastern Finance and Management, 14(4), 692–712.

Wallace, W. A., & Kreutzfeldt, R. W. (1991). Distinctive characteristics of entities with an internal audit department and the association of the quality of such departments with errors. Contemporary Accounting Research, 7(2), 485–512.

Wang, J., Chen, Y., & Wang, S. (2024). Exploring the relationship between corporate ESG performance and corporate violation: Based on the fraud triangle theory. Corporate Social Responsibility and Environmental Management, 31(6), 5606–5626.

Pandapotan, F., Puspitasari, F., & Maharani, A. (2023). Internal control, audit quality, and tax avoidance: Evidence from property and real estates. Neo Journal of Economy and Social Humanities, 2(2), 71–77.

Yoon, B., Lee, J., & Cho, J. (2021). The effect of ESG performance on tax avoidance—Evidence from Korea. Sustainability, 13(12), 6729.

Zolotoy, L., O’Sullivan, D., Martin, G. P., & Wiseman, R. (2020). Stakeholder agency relationships: CEO stock options and corporate tax avoidance. Journal of Management Studies.