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Archive for the month “November, 2011”

Corporate Social Responsibility and Taxes

Corporate social responsibility has been a topic of wide and speculative interest to both managers and academics.  A cultural and corporate shift is taking place in the world. The result of things like the current economic climate and recognition of global climate change, society is starting to push past awareness and into action. As this transition takes hold, companies are evolving from their reactive

Corporate social responsibility among businesses has revolved around risk mitigation and self-regulation. Instilled to make sure companies would abide by the law and perform ethically, CSR has focused predominantly on issues of overtime in factories and sexual harassment.states, and moving toward more pro-active approaches. Social media has begun to play a key role in how companies shape their corporate social responsibility (CSR) policies and present themselves as good corporate citizens.
Today, CSR functions as more than just a set of guidelines to keep companies out of trouble. Because the end goal for corporations has risen above simply selling a product or service, the standard for CSR is being redefined and is evolving as a driver of innovation. The bottom line is now three-fold, and is centered on people, planet, and profit. As business leaders strive to build more sustainable and socially responsible entities, formal social media strategies are becoming paramount.Oddly enough, there was a time when Britain had no patience with corporate tax avoiders. David Williams, of KPMG’s tax business school, says that legal tax cases during the Second World War showed a marked shift in the attitude of the courts.”There was a feeling there where everybody pulled together,” Williams said. “It was the last time society and the state really was seen as virtually the same thing. To reduce your tax payment in that sort of circumstance would have been seen as an enormously irresponsible thing to do.”
Nowadays,  however, it is rare for big business to see the payment of taxes as an explicit social duty. Public companies do frequently claim to practice “corporate social responsibility” (CSR), and most leading businesses boast of charitable and green activities in their annual reports. Barclays Bank calls itself a “responsible global citizen”, with concerns ranging from carbon emissions to credit card fees. It even has a reputation committee, chaired by deputy chairman Nigel Rudd. But nowhere does its policy mention Barclays’ tax avoidance schemes.
The advertising group WPP, before moving to the Irish Republic last November to cut its taxes, boasted six different kinds of “corporate responsibility”, including minimizing its environmental impact and only engaging in “ethical marketing”. Tax did not figure in the list. The drinks firm Diageo does go into laudable detail about tax policy. Nowadays, it claims to allocate taxes fairly between countries, trade with subsidiaries on a genuine “arms-length” basis, and only book profits in “the territories where our assets, activities and risks are located”.
But the company declines to discuss the reasons why it reassigned its valuable Johnnie Walker brand to a low-tax regime in the Netherlands, and subsequently fell out with Revenue & Customs about tax avoidance. “The majority view remains, especially among multinationals, that tax is a cost to be minimized, and that tax avoidance is a legitimate activity,” says John Christensen, economist and director of the campaign group Tax Justice Network.
Christensen added that when he examined the corporate social responsibility policies within the statements of some of the biggest companies several years ago, “none of their statements mentioned tax”. Dave Hartnett, the Revenue’s top civil servant, has banged the drum in parliamentary evidence for companies to link tax with CSR.

But research by Oxford academics shows those businesses “believed that shareholders, analysts, the media and the public do not seem to pay attention to corporation tax, whether due to a lack of comprehension or a lack of concern.

“Respondents were unanimous in saying that the payment of corporation tax is not at present a social issue relevant to CSR,” said the report from a team headed by Prof Judith Freedman at the Centre for Business Taxation. Things may be beginning to change. Research also shows that nearly 60% of financial directors in the UK do now regard tax as an ethical issue.
“There are a significant minority of companies who agree that paying tax is a key part of corporate responsibility, if not the core corporate responsibility to society,” Christensen says. “Tax is where CSR begins.”
There was a time when companies issued press releases, and operated under the impression that they controlled the message of their brand. Those days are gone. Today, the brand image is linked to the thoughts and conversations of a company’s consumers. Therefore, businesses must get to know their constituents.
By sparking authentic and transparent conversations via social media, companies are can learn what their stakeholders expect of them. Absolute transparency, no holds barred, is key.

– Anisha Bhatia

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