This study investigates the impact of Environmental, Social, and Governance (ESG) controversies on corporate tax avoidance in the German capital market. Using a panel of DAX 40 firms over the period 2017–2024 and estimating firm fixed-effects models, corporate tax avoidance is measured using three widely adopted proxies: permanent book-tax differences (DTAX), tax-sheltering probability (SHELTER), and cash effective tax rates (CETR). The empirical results indicate that lagged ESG controversies have no a statistically significant effect on firms' tax avoidance behavior. These findings challenge the conventional view that financial or reputational pressures systematically shape corporate tax decisions. Instead, they suggest that in highly regulated and transparent institutional environments, corporate tax strategies are largely insulated from short-term reputational shocks. Overall, the evidence supports a more nuanced interpretation of Legitimacy Theory and Political Cost Theory, indicating that their explanatory power is constrained within the context of the European Union's stringent governance, transparency, and reporting framework.

JEL Classification: M14; H26