TAX AVOIDANCE AND CORPORAT ES SOCIAL RESPONSIBIL IT Y

PEOPLE AND JUSTICE

MN5001

INTRODUCTION

• Focusing on the effects of tax avoidance

• Corporate Social Responsibility (“CSR”)

as a tool to encourage social justice and

morality

• The problems of tax avoidance

• The implication of tax avoidance on economic growth

• Effects of tax avoidance on society within developing

countries

“More than four out of five

adults believe tax dodging

by corporates is morally

wrong” (Molina, 2015)

CSR OVERVIEW

• Corporate Social Responsibility

• Companies take stakeholder interests into account

• Stockholders, employees, neighbors, the environment, etc.

• Can be seen as a tool for moral/social justice

• Corporations seen as “citizens”

• Adherence to same moral codes as normal citizens

• Takes place on multiple levels

• Institutional

• Organizational

• Individual

MORAL BEHAVIOR

• Moral standards are often higher than legal requirements

• Moral behavior comes in steps from amoral behavior to

ethical behavior

• CSR takes place in this model and is closely tied to

morality

• CSR is conducted voluntarily

• Social pressure

TAX AVOIDANCE

• “Tax avoidance [...] is mostly associated with companies, rather than

individuals. It usually falls just within the limits of the law, but goes against

the spirit of the law. Using aggressive tax planning techniques, certain

companies exploit legal loopholes in tax systems and mismatches between

national rules to minimise their tax bills and avoid paying their fair share of

taxes” (European Commission, 2015)

• Especially practiced by MNCs

• Leads to distortion of

competition

(McTague , 2013)

INTERNATIONAL TAX COMPETITION

Average global tax rate 2000-2011

(KPMG , 2011)

• Pressure to attract foreign

direct investment leads to

continuous decrease of

tax rates

• Accumulates to an

average revenue loss

of 13 percent in

non-OECD countries

TAX AVOIDANCE BY ASSOCIATED BRITISH FOOD GROUP IN ZAMBIA

• Associated British Food group

• International food, ingredients and retail

group with annual profit of £12,9bn

• Subsidiary ‘Zambia Sugar‘

• Shifts a third of pre-tax profits, £13m

a year, to tax havens

• Enough money to put 48,000 children

in school

(Country Reports, 2015)

(Specialised Training Solutions, 2013) (Mfula, 2010)

ECONOMIC IMPACT ON DEVELOPING COUNTRIES

• Diminishes future potential economic growth

• Generally a greater impact for developing countries

• Loosing out on a large amount of tax revenue

• Additionally due to lower tax rates

(Oxfam International, 2013)

ECONOMIC IMPACT ON DEVELOPING COUNTRIES

• Taxes help improve social services and infrastructure

• Assists in reducing poverty levels

• Helps improve living standards

• Sustainable growth is important

• BRIC countries

• Requires fiscal independence

• Tax avoidance is social irresponsibility

• Stumps economic growth and human development

“Tax avoidance is a

crime against the

nation”

(Landolf, 2006, p.7)

JUSTICE IN SOCIETIES

• “Society at large” as a corporation’s stakeholder

• World bank figures

• Access to clean water

• Life expectancy

• School enrolment

Sayer (2008) articulates that people flourish or suffer depending on how their needs are

met.

JUSTICE IN SOCIETIES

• Tax avoidance

• social and health problems

• Nigeria’s case

• The importance of the Procedural Justice

• Rawls (2009) “Veil of ignorance”

Center for Social Innovation (2015)

CONCLUSION

• Tax avoidance negatively impacts developing countries

harder.

• Tax avoidance is unjust and immoral

• G20 are implementing regulations to try reduce tax

avoidance

• Does not incorporate developing and non-OECD

countries

• Should be standard worldwide regulations

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THANK YOUANY QUESTIONS?