Posts Tagged ‘corporate citizenship’

Is tax the new area of concern for Corporate Social Responsibility?

Tuesday, March 17th, 2009

By Charles Wanguhu

In early 90’s Nike suffered a huge backlash from the revelations of child labour in use in its factories abroad there was a drive to ensure that clothing was environmentally sound. In early 2000 a push for carbon footprint labelling ensured that the consumer was conscious of the effect of their consumption habits on the climate.

In 2009 after a guardian expose there has been uproar on tax evasion by the big Corporations. The Corporations through the use of extensive webs of subsidiaries in tax havens have managed to create a near zero tax liability status in their country of operations. The guardian describes it as “the triumph of technical proficiency over social responsibility”.

It is likely to spark the age old debate about whether a corporation’s main point of existence is the creation of shareholder value. If that point of view is to be accepted the lesser tax paid to the government then assumingly a higher dividend or return is then passed on to the shareholder.

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In response, the corporates argue that in strictly legal terms they are not breaking the law or involving themselves in an illegality. In this instance should the regulator then be blamed for the tax avoidance and how can the regulator keep abreast of all new avoidance schemes when at the moment they stand at close to 200 known schemes. The corporate social responsibility debate has been largely pushed forward by the moralist argument rather than the strict legalistic interpretation of the corporate duties to society.

A corporation like all legal persons has a responsibility to pay taxes and in turn the government to provide services at an acceptable threshold. In the instance of the Johnny walker brand while the more valuable royalties earned were moved from England to Holland (which had a zero rating tax on IP rights) while the production largely remained in England. Therefore in one swoop a huge tax gap is imposed on England tax offices. The tax gap has then to be filled by the low income and small businesses who are unable to hire the services of the lawyers, accountant and consultants that dream up these schemes.

A new incentive similar to the carbon footprint labelling of food has been initiated See more at tax ticked, it in effect aims to reward good corporate citizenship.

If successful the focus will then return to all round good corporate citizenship as opposed to charitable acts which is easily negated by tax evasion.

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