Taxes: a CSR issue often neglected
Paying taxes is never a popular topic. However, with some companies avoiding their fair share of taxes, the money needed to finance health systems, education and other crucial social subsystems, is not available. Taxes should therefore be seen as an issue of good corporate governance and responsible business practice.
In recent years, scandal after scandal has exposed companies using loopholes in the tax system to avoid taxation. Now more than ever, it is becoming clear that citizens around the world are paying a high price for the crisis in the global tax system, and the discussion about multinational corporations and their tax tricks remains at the top of the agenda.
Governments need sufficient and sustainable revenues from taxation to fund essential public services for their citizens including healthcare and education, and to pay for the public infrastructure needed to raise living standards, increase gender equality and build well-functioning economies. From a rights-based perspective, transparent and accountable interactions between governments and their citizens are at the root of prosperous and fair societies. Taxes play a central role in this interaction as they embody the social contract between states and citizens, and represent key sources of investment in the progressive fulfilment of human rights.
Responsible companies, committed to making a contribution to sustainable development and ensuring their own long-term success, must start thinking (and talking) about the impacts of tax avoidance, and managing them for the common good.
There is a wide range of positive behaviours and actions companies can undertake to go beyond legal compliance and result in significant gains for developing countries. Companies would benefit because responsible tax behaviour helps mitigate risk and is in companies’ own long-term interest. The best companies – and their investors – recognize that their success is inseparable from the success of the society in which they operate. Companies should care about being responsible in their tax behaviour, both from a risk management perspective and taking into account the impact of corporate tax behaviour on human rights and sustainable development.
Author: Petra Hartman (Ekvilib Institute)