Tax Compliance Strategies and Their Influence on Corporate Financial Sustainability

Abstract

This research investigates the complex relationship between corporate tax compliance strategies and long-term financial sustainability, proposing a novel analytical framework that moves beyond traditional compliance-versus-evasion dichotomies. We introduce the concept of ’Strategic Tax Posture’ (STP), a multidimensional construct that captures how firms integrate tax planning with broader
corporate governance, stakeholder expectations, and sustainability objectives. Unlike prior studies focusing primarily on legal compliance or revenue maximization, our approach examines tax strategy as a dynamic component of corporate
resilience and ethical positioning in global markets. Through a mixed-methods
design combining archival financial data analysis from 150 multinational corporations (2000-2004) with qualitative case studies of firms navigating post-Enron
regulatory environments, we identify four distinct strategic archetypes: Defensive
Conformists, Proactive Harmonizers, Selective Optimizers, and Transformative Integrators. Our findings reveal that firms adopting Proactive Harmonizer and Transformative Integrator postures—characterized by transparent reporting, stakeholder
engagement in tax policy, and alignment of tax payments with operational geography—demonstrate superior long-term financial stability, lower volatility in earnings,
and enhanced access to sustainable financing. Conversely, aggressive optimization
strategies, while yielding short-term cash flow benefits, correlate with increased
reputational risk and regulatory scrutiny that undermine financial resilience. The
study contributes a new theoretical lens for understanding corporate taxation as a
governance and sustainability issue rather than merely a financial obligation, with
practical implications for regulators, investors, and corporate boards seeking to
foster economically sustainable and socially responsible business practices