Companies that are the most proactive on CSR have been the least transparent on their tax affairs according to one US study. Post-Panama Papers, this is set to change
The unprecedented scale of the so-called Panama Papers leak, along with other recent high-profile reports of multinational companies resorting to tax avoidance and artificial tax structures, have brought the question over the morality of corporate tax conduct into sharp focus.
Public and stakeholder pressure for decisive action on the issue has increased, amid a sense that multinational enterprises (MNEs) are able to get away with the unfair advantage that reduced effective tax rates (ETRs) give them. This includes a legal claim against Amazon and the government of Luxembourg that the online giant's aggressive tax planning constituted illegal state aid and was contributing to the decline of traditional booksellers, while the UK's business secretary, Sajid Javid, has said that the controversial “sweetheart deal” between the UK government and Google had fuelled a sense of injustice.
This poses the question: does poor conduct (or, at the very least, morally questionable behaviour) on tax undermine a company's reputation as a responsible business with a strong corporate social responsibility record? And should firms be giving the same level of attention to tax transparency as they do to traditional ESG topics?
CSR v ETR?
According to a recent study of US public corporations by the American Accounting...