Mass media increasingly reports and shames aggressive corporate tax strategies and society is increasingly demanding companies to be good citizens also in tax-related matters. Recently influential non-governmental organizations have campaigned to frame corporate taxation as a Corporate Social Responsibility issue. In the face of this evidence, one can wonder whether aggressive tax behaviours can be considered ethical and consistent with CSR. Answering this question is not easy, as aggressive tax behaviours, can be assessed in a very different ways.
On the one hand, there are those who accept that companies try to minimise their tax bases by actively organizing their affairs to receive the maximum deductions offered in various jurisdictions. Such behaviours are not considered in contrast to CSR principles.
On the other hand, tax payment is considered a fundamental example of a company’s citizenship behaviour. Thus companies should pay the due amount of taxes in order to contribute to social services. So try to legally avoid paying taxes is considered to be in sharp contrast with a social responsible behaviour.
In this context, distinguishing between legal and illegal tax behaviours is often difficult and many questions still remain:
- Can a company claim to be socially responsible while adopting aggressive tax practices?
- Paying taxes is a duty or just a cost?
- What is the boundary between legality and ethics in tax behaviour?
The DIPCAT Project
This case study is linked to the case covered by other parts of the DIPCAT project. It highlights CSR and tax issues of a MNE operating in the textile industry throughout Europe. The Group is very committed to CSR and has a specific CSR department. The Group is introducing a new tax policy aimed at reducing the tax pressure. In fact it is planning to create a new corporate and to move part of the production process in two low-tax countries. Moreover the Group is moving has decided to move the Group financing company in a country characterised by opacity on tax information.
Such proposals affect the Group’s CSR strategy. Thus students will be asked to identify themselves with different categories of stakeholders, and assess the tax decisions described in the case study in order to answer the following questions:
- How company’s stakeholders will perceive the Group’s new tax policy?
- What would be the effect of putting into practice the tax proposals on the principles applied for the sustainability reports?
The case is intended to offer students the opportunity to form their own idea about:
- the relationship between tax behaviour and socially responsible behaviour;
- difficulty in drawing a clear line between correct and incorrect tax behaviour;
- consistency between aggressive tax behaviours and CSR.