Corporate Tax

Is corporate tax morale changing into a cornerstone of CSR?

With revenues now well publicized, companies are coming under increasing scrutiny when it comes to taxes. International accounting and consulting firm Baker Tilly points out that this is now a serious corporate social responsibility issue.

The recently proposed “tycoon tax” by the Australian Greens, which would target mining companies and other large organizations with a 40 percent “super profit” tax, to bring $ 338 billion into Australian coffers over a decade Bringing has once again come into the spotlight on corporate taxation. Now the international auditing and advisory network Baker Tilly has asked itself whether corporate tax should be viewed as a moral issue.

The emergence of Corporate Social Responsibility (CSR) as a central business concept in the last few years can be made clear on the basis of research reports and in-house measures by following the activities of companies in the consulting area. PwC, for example, recently announced a global investment of US $ 12 billion in its so-called “New Equation” strategy, with an emphasis on ESG advice and sustainability as an important pillar of its development.

Simply put, companies today are under unprecedented pressure from the public and other stakeholders to act responsibly on issues relating to environmental sustainability, corporate governance, and employee and social welfare. One area of ​​CSR that has so far received less attention from the consulting world is the concept of tax ethics.

In a recent post, Baker Tilly – roughly the 10th largest global accounting and advisory network by revenue – brought up the issue, opening it with a quote from the late Australian business and media tycoon, Kerry Packer, that was once submitted to a state corporate tax investigation; “I do not evade taxes in any way, form or form. Of course I am reducing my tax. If someone in this country does not minimize their taxes, they want them to read their heads. “

It is all too common for companies to hold back against tax criticism that they are not breaking the law. But while tax minimization was once considered best practice, those days may be numbered. Baker Tilly points out that a company accused of being a bad corporate taxpayer is now risking serious reputational damage in the community as well as the heat of investors, in the same way as those who fail on other ESG matters are currently doing , determine.

Reputational risk

The question is, will this reputational threat be enough to drive change from within without relying on legislation? Baker Tilly’s world leader in corporate taxation, Ines Paucksch, says that while corporations not only surrender taxes to governments, the aggressive tax planning of yore is over. “Companies still want to limit their tax liability and the tax rate of their worldwide income is still an important metric. But they want to pay for it fairly. “

According to figures quoted by Baker Tilly, countries worldwide lose $ 427 billion in taxes annually from companies reporting in low-tax areas. Still, the issue is portrayed as a double-edged sword as neoliberal governments claim that lower tax rates lead to greater local investment. This approach has resulted in the average corporate tax rate falling from 40 percent in 1980 to around 24 percent today. Even so, many governments seem incapable of acting.

Androulla Soteri, Director of Tax at Baker Tilly, points out that as public expectations and controls increase, the problem could partially resolve itself. “I assume that in the future, when it comes to tax services, we will have many more customers who tell us that we want a moral tax policy. These companies want to be completely transparent and never appear in the headlines as a company that is not paying its fair share of taxes. “

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