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Responsible Capitalism: Legal Tax Liability Minimization versus Socially Responsible Tax
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This study provides a survey on corporate taxes around the world. Our analysis has three main objectives. First, we collect tax data and calculate (forward-looking) effective tax measures for a large sample of countries and recent years. We particularly describe how these measures vary over time and across countries. Second, we augment the country-level information with firm- and industry-level data (providing weights for financial structure and asset composition) to contrast statutory measures at the level of countries with measures accounting for firm- and industry-specific weights. Third, we utilize our new data to (i) estimate Laffer-Curves, i.e., the relationship between statutory tax rate and tax revenue, based on nonparametric as well as parametric specifications; (ii) examine how taxes affect investment in fixed assets at the level of firms. As for the latter, our preferred specification, in which we use a firm-specific effective marginal tax rate to capture tax incentives, suggests an elasticity of .
This paper reviews the rapidly growing empirical literature on international tax avoidance by multinational corporations. It surveys evidence on main channels of corporate tax avoidance including transfer mispricing, international debt shifting, treaty shopping, tax deferral and corporate inversions. Moreover, it performs a meta analysis of the extensive literature that estimates the overall size of profit shifting. We find that the literature suggests that, for the most recent year, a 1 percentage-point lower corporate tax rate compared to other countries will expand before-tax income by 1.5 percent-an effect that is larger than reported as the consensus estimate in previous surveys and tends to be increasing over time. The literature on tax avoidance still has several unresolved puzzles and blind spots that require further research.
The tax practices of multinationals are in the eye of the storm. The public outcry reflects deep concerns about the moral integrity of the tax system. Taxes make society and freedom possible, and paying taxes is about sharing the financial burden involved in societal cooperation. The distribution of the tax burden is an expression of the values of distributive justice and solidarity. Tax laws translate the moral obligation to contribute to society into a set of legal obligations.
Good tax governance should be ethical tax governance. Ethical and reputational tax risks should be carefully managed. Codes of conduct are important instruments to enhance moral corporate behaviour. They generate transparency, thereby enabling stakeholders to evaluate the ethical quality of a corporation’s strategy.
Tax codes of conduct are aimed at providing guiding principles to businesses and tax administrations to increase trust in the tax system on the part of society. The element of trust comprises not only the fact that both parties remain within the boundaries of the law, but also that everyone plays fairly and acts in an ethically compliant manner. Thus, tax codes of conduct are a good starting point to operationalize a company’s commitment to ethical tax governance.
The taxation of the multinational enterprise (MNE) has been a continuing
concern for policy-makers. We argue that the changing nature of the
mobile MNE (e.g., its improved ability to fine-slice the value chain and
disperse it geographically) makes it increasingly important to rethink
current tax policies. First, there should be more focus on the inefficiencies
that arise when taxation leads to inefficient location of MNE activities.
Thus, MNEs may shift activities to low-tax jurisdictions that offer lucrative
pecuniary and non-pecuniary incentives, which seldom coincide with those
locations where MNE investments would maximize their contribution to
global value creation. Second, international tax regimes should ensure that
MNEs pay for their consumption of local public goods, and public finance
scholars have long known that the taxation-based distortions are
minimized when the tax objects are immobile. However, the bulk of current
tax policies are aimed at corporate profits that are both poor proxies for
the consumption of local public goods as well as extremely mobile.
Integrating theory from international business, public finance and economic
geography, our analysis demonstrates that moving the incidence of
taxation from corporate profits to dividends and consumption would
unambiguously improve both wealth creation and efficiency.
In this study, I demonstrated that there is a corporate social contract between firms and their host communities. The implication is that the idea of the social contract places corporate social responsibility (CSR) on a conditional pivot, whereby the host communities have to fulfil their own side of the contract in order to merit CSR projects. I examined the implication of the social contract for corrupt and unaccountable host communities. I based my analysis on two philosophical frameworks, namely: one, Constructive Approach CSR (CA-CSR), and two, Restorative Approach CSR (RA-CSR). CA-CSR is hinged on the deontological and utilitarian moral frameworks, while RA-CSR is based on the restorative justice framework. Further, I developed ‘CSR Calculus’ (V = f1+n + K) to determine the value of CSR-due for a host community, in response to Milton Friedman questions of arbitrariness in the formulation of CSR projects. I also demonstrated how the CSR Calculus can be applied to determine the value of CSR owed communities by Micro, Small and Medium scale Enterprises (MSMEs). Finally, I used the ethic ‘leave a better community’ derived from the Annang proverb – Assidsip ye Akwot-kwot ete yak mfin ami afon akan mkpong (Assidsip and Akwot-kwot say make today better than yesterday) to signpost the corporate social contract and demonstrated why it is essential for every firm to commission and decommission its operations in socially responsible manner such that it can bequeath a better future society.
Available for download atSSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3119552
The purpose of this contribution is to explore the possibility of integrating tax with corporate social responsibility (CSR). Some corporate directors seem to argue that they do not have a choice with regard to tax planning, implying that a responsible tax planning strategy is not an option. This contribution shows such argument to be wrong. First, the issue of management accountability and choice will be dealt with in the context of corporate governance systems in order to find out what kinds of obligations corporate governance entail for managers. It will be shown that corporate directors enjoy sufficient discretion for making socially responsible decisions. To this end, two existing theoretical frameworks will be analysed, according to which corporate decisions should prioritise either shareholders or stakeholders interests. Both theories allow managers a choice to act with a wider interest than purely shareholder value maximisation. Furthermore, it will be argued that managerial discretion to take CSR into account does not oblige managers to aspire to some kind of ideal social responsibility but rather to stay away from corporate social irresponsibility (CSI). Therefore, corporate managers in different corporate governance regimes have sufficient room for aligning their tax planning strategies with societal expectations and avoiding aggressive tax planning.
Thus, this paper aims to make two contributions to academic theory. First, it is shown that both shareholder and stakeholder-oriented corporate governance regimes allow for managerial discretion to take CSR on board in tax matters. Secondly, the concept of corporate social irresponsibility is introduced to enhance a more balanced debate about multinationals’ tax planning practices.
Contemporary societies are bound in a fiscal social contract between citizens and their elected governments who administer the states in the interest of all members. The fiscal social contract implies that citizens should pay tax which is utilized by government to execute programs for the collective good. While the advanced countries have done a better job of mobilizing tax as a resource for societal development, developing countries have performed poorly. A large number of high-income earners in developing countries avoid the tax system thus hampering development efforts. Previous studies have alluded to a culture of tax evasion among citizens of developing countries as a key factor influencing noncompliance. However, this study argues that these studies did not reach the best conclusion as their methodology excluded the taxpayers’ narratives. We interviewed self-employed taxpayers in Nigeria’s capital city, Abuja. Results of the analysis revealed taxpayers’ frustration with an opaque tax system, deplorable socioeconomic condition, and nonfunctioning of the tax audit system. We argue that the massive tax noncompliance in developing countries may be better understood as “tax boycott” arising from taxpayers’ frustration with the fiscal social contract of governance. Policy implications of the findings were discussed in the concluding section.
The predominant view of the role of business in society is that the objective of business is to maximize profit. Some argue that it ought to be something different. Others argue that for many firms it already is something different. However, the “something different” has not been fully fleshed out in its various versions. To address this gap, we define different relationship types between variables in an objective function and develop and present the resulting range of 10 alternative objective functions for firms. We then discuss how their development contributes to conceptual, empirical, and normative debates about organizational purpose. Removing the conventional assumption of profit maximization as the sole management principle opens up the possibility of new, more nuanced theoretical approaches to management. This article lays the groundwork for such theory development through the systematic and analytical identification of alternative objective functions that represent different specifications of firm purpose.
Available for download at SSRN: https://ssrn.com/abstract=3021914
Multinational corporations’ tax practices are hotly debated nowadays. Multinationals are accused of not paying their fair share of taxes. Apparently, acting within the limits set by law is not sufficient to qualify as morally responsible behavior anymore.
This article offers ethical reflection on the current debate.The general public typically evaluates (aggressive) tax planning in moral terms rather than legal terms. Therefore, multinationals need to reflect on their tax planning strategy next to economic and legal terms also in ethical terms. This article addresses the relationship between society, morality and taxes. The concepts of tax planning, “aggressive tax planning”, “tax evasion” and “tax avoidance” are elaborated on to exemplify the difference between a purely legal and broader approach. In moral terms, aggressive tax planning may imply loss of integrity and trust which may entail certain costs for businesses, such as reputation damage. It will be argued that in order to improve corporate reputation and (moral) leadership, corporate social responsibility (CSR), endorsed by many corporations around the globe, is a helpful tool. Reflection on tax planning in the context of CSR – good tax governance – should foster a moral mind set and enhance accountability and transparency.
Available for download at SSRN: https://ssrn.com/abstract=3021914
This article takes stock of the discourse on ‘political CSR' (PCSR), reconsiders some of its assumptions, and suggests new directions for what we call ‘PCSR 2.0'. We start with a definition of PCSR, focusing on firms' contribution to public goods. We then discuss historical antecedents to the debate and outline the original economic and political context. The following section explores emerging changes in the institutional context relevant to PCSR and reconsiders some of the assumptions underlying Habermas' thesis of the postnational constellation. This highlights some neglected issues in previous works on PCSR, including the influence of nationalism and fundamentalism, the role of various types of business organisations, the return of government regulation, the complexity of institutional contexts, the efficiency of private governance, the financialization and digitalization of the economy, and the relevance of managerial sensemaking. Finally, we discuss the contributions to this special issue and relate them to the newly emerging research agenda. This article is protected by copyright. All rights reserved.
This is the conundrum that gives rise to the issue of tax avoidance: Although governments always seem to lack sufficient funds to support the needs of society, tax codes are often written that offer “a way out” of paying taxes for some but not all constituents. The ways out are referred to as loopholes that allow taxpayers to avoid taxes. This paper first defines the basic terms of tax avoidance and tax evasion and then offers an ethical review of the morality of aggressive tax avoidance. Aggressive tax avoidance is then addressed in relationship a corporate entity’s tone at the top. The conclusion is drawn that use of the letter of the law to avoid payment of taxes sorely needed by governments for the good faith provision of public goods and services is ethically unacceptable. Several suggestions for change are provided, including a new financial statement disclosure and the possibility of a published corporate ethics report.
In contrast to many aspects of the social responsibility of business, CSR scholarship has been largely silent on the issue of the payment of corporate tax. This is curious because such tax payments are often considered a fundamental and easily measured example of a company’s citizenship behavior. However, because the payment of corporate tax can often be legally avoided, this activity represents a boundary condition for CSR. If the law and CSR suggest that a company should pay its fair share of tax, yet many successful companies actively avoid this social obligation, should they be considered socially irresponsible. This paper explores the issue of tax avoidance and the implications it has for any credible definition and measure of CSR. It also highlights an aspect of corporate practice that is deliberately hidden from public view.
Using an institutional theory framework we theorize, hypothesize, and empirically show that higher levels of formal and informal corruption environments found in a firm's operating portfolio are related to higher levels of corporate social irresponsibility (CSiR). Failing to consider corruption's informal dimension leads to potentially false perceptions about a multinational enterprise's (MNE) operating environment, particularly when the formal dimension is low but the informal corruption dimension is high, as is the case in about one third of our sample. Including the informal corruption environment component provides additional explanatory power over the formal corruption environment alone in predicting CSiR and yields a superior understanding of both the formal and informal dimensions of the corruption institutional environment's influence on corporate social irresponsibility levels of MNEs. Managerial implications and future research directions are discussed.
Anecdotal evidence often suggests that multinational enterprises (MNEs) operating in developing countries “exploit their multinationality” to avoid paying taxes to host governments. This article explores the concept of “responsible tax” as a corporate social responsibility (CSR) issue for MNEs, based on the notion that MNEs face considerable variation in the extent, monitoring, and application of tax laws internationally. This variation creates a “moral free space” as to which tax payments to make. Using firm-level data from three important sectors in India, the authors explore whether foreign MNE subsidiaries pay higher taxes than local firms, and whether, in the case of MNEs, there are differences between subsidiaries of MNEs with and without a reputation for CSR. The results show that MNEs pay considerably higher effective tax rates than do local firms, and MNE subsidiaries known for CSR pay more tax than do MNE subsidiaries less known for CSR. This set of findings suggests that MNEs operating in India see taxation in developing countries in relation to CSR.
TAX REVENUES ARE THE LIFEBLOOD OF DEMOCRATIC GOVERNMENT AND THE SOCIAL CONTRACT, BUT THE MAJORITY OF MULTINATIONAL BUSINESSES HAVE BEEN STRUCTURED SO AS TO ENABLE TAX AVOIDANCE IN EVERY JURISDICTION IN WHICH THEY OPERATE. JOHN CHRISTENSEN AND RICHARD MURPHY OF THE TAX JUSTICE NETWORK ARGUE THAT POLICY MEASURES ARE REQUIRED TO REDRESS THE DISTORTIONS THAT HAVE ARISEN AS GLOBALIZED COMPANIES HAVE LEFT NATIONALLY BASED TAX REGIMES FLOUNDERING. BUSINESSES SHOULD ADOPT CORPORATE SOCIAL RESPONSIBILITY STANDARDS ON TAXATION, INCLUDING REQUIREMENTS TO PUBLISH ALL NECESSARY ACCOUNTING INFORMATION AND TO REFRAIN FROM THE USE OF PROFITS-LAUNDERING VEHICLES CREATED WITHOUT SUBSTANTIAL ECONOMIC PURPOSE.:Development (2004) 47, 37–44. doi:10.1057/palgrave.development.1100066
We study reforms of nonlinear income tax systems from a political economy perspective. We present a median voter theorem for monotonic tax reforms, reforms so that the change in the tax burden is a monotonic function of income. We also provide an empirical analysis of tax reforms, with a focus on the United States. We show that past reforms have, by and large, been monotonic. We also show that support by the median voter was aligned with majority support in the population. Finally, we develop sufficient statistics that enable to test whether a given tax system admits a politically feasible reform. (JEL D72, H21, H24)
This paper provides the first theoretical and empirical analysis of how taxation shapes the joint allocation of risk and profits inside the multinational firm. Theoretically, we identify three mechanisms through which corporate taxes may shape the within-firm allocation of risk: (1) transfer pricing rules requiring risk to be compensated with higher expected returns create incentives to shift risk to low-tax jurisdictions as a means to shift profits; (2) risk-averse owners create incentives to allocate risk to high-tax affiliates to maximize risk-sharing with governments; (3) limited loss offset creates incentives to shift risk to affiliates in other countries. Empirically, we show that multinational firms disproportionately allocate risk to low-tax countries and that the key mechanism is the nexus between risk and profits established by transfer pricing rules. Within-firm differences in risk explain a significant fraction of the well-established correlation between profits and tax rates suggesting that risk shifting is a quantitatively non-negligible channel for profit shifting.
This paper estimates the incidence of corporate taxes on wages using a 20-year panel of German municipalities exploiting 6,800 tax changes for identification. Using event study designs and difference-in-differences models, we find that workers bear about one-half of the total tax burden. Administrative linked employer-employee data allow us to estimate heterogeneous firm and worker effects. Our findings highlight the importance of labor market institutions and profit-shifting opportunities for the incidence of corporate taxes on wages. Moreover, we show that low-skilled, young, and female employees bear a larger share of the tax burden. This has important distributive implications.
Business is undergoing a conceptual revolution. Since the Global Financial Crisis there are many new ideas and proposals to make capitalism more responsible. The purpose of this paper is to identify key flaws in the “old story” of capitalism. Six principles are explained that taken together form the basis for a new story of business, one of responsible capitalism.
Purpose
This paper aims to answer how corporate governance and corporate social responsibility (“CSR”) affect the relationship between value creation and tax avoidance. This study further analyses the impact of the institutional environment, i.e. whether a country is rather a liberal or a coordinated market economy, on the relationship between CSR and tax avoidance.
Design/methodology/approach
The empirical analysis comprises a panel data set of 7,924 observations for the years from 2005 to 2014 for European companies. The relationship between value creation and tax avoidance is tested by grouping the sample in high and low CSR performers. Similarly, the impact of the type of market economy is analysed for the firms.
Findings
The research design does not find evidence that tax avoidance is creating value. The empirical findings reveal that there is a positive relationship between value creation and the effective tax rate for firms with low social and environmental characteristics. Further, this analysis could show that stronger corporate governance is associated with a lower effective tax rate in both coordinated and liberal market economies. The analysis identifies social strengths being associated with a higher effective tax rate for coordinated market economies.
Practical implications
It is proposed to encourage CSR disclosure. The creation of incentives for social strengths could increase tax revenue. Firms should reconsider whether the engagement in tax avoidance is worth it and pursue social responsibility to achieve higher value creation for their stakeholders.
Originality/value
The paper challenges the intuitive expectation that tax avoidance creates value. It is suggested that the governance and CSR culture, as well as the tax legislation in Europe, is different to the USA. Conclusively, tax avoidance is not generating value for the European sample.
1. Problems of taxation, in connection with economic development, are generally discussed from two different points of view, which involve very different, and often conflicting, considerations: the point of view of incentives and the point of view of resources. Those who believe that it is the lack of adequate incentives which is mainly responsible for insufficient growth and investment are mainly concerned with improving the tax system from an incentive point of view through the granting of additional concessions of various kinds, with less regard to the unfavourable effects on the public revenue. Those who believe that insufficient growth and investment is mainly a consequence of a lack of resources, are chiefly concerned with increasing the resources available for investment through additional taxation even at the cost of worsening its disincentive effects.
This paper explores the relationship between culturally mediated narratives of fairness, conceptions of the state, group and individual identities, citizenship and debates about globalisation in Australian perspectives on tax administration. It is based on a qualitative analysis of 2374 responses to a survey of attitudes to the Australian tax system. This paper emphasises that taxpayer's statements can be read as cultural acts that enrich our understanding of how people give meaning and significance to their lives. The majority of respondents reported that taxation should be levied fairly across social groups. However, this sense of fairness is being eroded by the widespread perception that the wealthy are avoiding their “fair share” of taxes. However, although citizens view tax administration as increasingly unfair, there is no evidence of wholesale disengagement from the system. The majority of people believe that the tax system has legitimacy and that it can be reformed. There is still scope for policy innovation that reinstates a sense of fairness, equity and balance to the tax system.
There are palpable cracks in the Botswana economic growth success story, most apparent in the evidence of persistent and extreme inequality. This article offers new insights into the Botswana puzzle by focusing on redistributive policies – taxation and transfers – as potential mechanisms to tackle poverty and inequality. The historical analysis explores how the minimal redistributive policies reflect the interests of the elites and how these actors justify their policy decisions with reference to the needs of the poor – an important electoral constituency; and it links policy developments to social and economic outcomes where no comprehensive social security system and negligible taxations means that only the well-to-do are in positions of income security and only the most vulnerable receive some relief. Diamond-rich Botswana avoids taxing its citizens. In terms of citizen engagement and ability to pursue social justice this may be a mistake.
Purpose
– The purpose of this paper is to contribute to the ongoing debate on governance, accountability, transparency and corporate social responsibility (CSR) in the mining sector of a developing country context. It examines the reporting practices of the two largest transnational gold-mining companies in Tanzania in order to draw attention to the role played by local government regulations and advocacy and campaigning by nationally organised non-governmental organisations (NGOs) with respect to promoting corporate social reporting practices.
Design/methodology/approach
– The paper takes a political economy perspective to consider the serious implications of the neo-liberal ideologies of the global capitalist economy, as manifested in Tanzania’s regulatory framework and in NGO activism, for the corporate disclosure, accountability and responsibility of transnational companies (TNCs). A qualitative field case study methodology is adopted to locate the largely unfamiliar issues of CSR in the Tanzanian mining sector within a more familiar literature on social accounting. Data for the case study were obtained from interviews and from analysis of documents such as annual reports, social responsibility reports, newspapers, NGO reports and other publicly available documents.
Findings
– Analysis of interviews, press clips and NGO reports draws attention to social and environmental problems in the Tanzanian mining sector, which are arguably linked to the manifestation of the broader crisis of neo-liberal agendas. While these issues have serious impacts on local populations in the mining areas, they often remain invisible in mining companies’ social disclosures. Increasing evidence of social and environmental ills raises serious questions about the effectiveness of the regulatory frameworks, as well as the roles played by NGOs and other pressure groups in Tanzania.
Practical implications
– By empowering local NGOs through educational, capacity building, technological and other support, NGOs’ advocacy, campaigning and networking with other civil society groups can play a pivotal role in encouraging corporations, especially TNCs, to adopt more socially and environmentally responsible business practices and to adhere to international and local standards, which in turn may help to improve the lives of many poor people living in developing countries in general, and Tanzania in particular.
Originality/value
– This paper contributes insights from gold-mining activities in Tanzania to the existing literature on CSR in the mining sector. It also contributes to political economy theory by locating CSR reporting within the socio-political and regulatory context in which mining operations take place in Tanzania. It is argued that, for CSR reporting to be effective, robust regulations and enforcement and stronger political pressure must be put in place.
We map trends of tax policy change in developing countries and transition economies since the 1980s, compare them to tax trends in the advanced Western democracies and review some of the explanations offered by the contributions to this volume. We find that non-Western countries follow the lead of Western countries in some important respects but not in others. While non-Western countries brought their general revenues closer to Western levels and copied important features of Western consumption taxation including higher value added tax revenues and lower revenues from trade taxation, they failed to emulate the hallmark of 20th-century Western taxation: a strong and progressive personal income tax. The taxation trends are closely associated with socio-economic changes (as summarized by GDP per capita) and structural factors (as summarized by country size). Yet the impact of political institutions on taxation is nonlinear and complex.
Tax cooperation puts offshore centers worse off, as their compensation for forgone profits is a hard political sell, and unlikely to produce the same spillover effects on wages and employment as the attraction of foreign tax base. Coercion by a great power thus seems to be a prerequisite for successful international cooperation in tax matters. Great power status is based on internal market size. Governments become substantially more likely to use this power through sanction threats against tax havens when two factors coincide: (1) domestic constraints preventing a shift of the tax burden to labor and consumption and (2) scope for redistributive cooperation benefitting great power banks or multinationals. Hypotheses are tested in an analysis of tax negotiations at OECD level between 1996 and 2014.
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This paper explores whether the usage of tax revenues affects tax-compliance behavior. I design a laboratory experiment in which subjects make tax-reporting decisions and are randomly assigned to treatments that differ in tax-revenue use. The results indicate that compliance depends on tax-revenue usage.
Low-income countries typically collect taxes of between 10 to 20 percent of GDP while the average for high-income countries is more like 40 percent. In order to understand taxation, economic development, and the relationships between them, we need to think about the forces that drive the development process. Poor countries are poor for certain reasons, and these reasons can also help to explain their weakness in raising tax revenue. We begin by laying out some basic relationships regarding how tax revenue as a share of GDP varies with per capita income and with the breadth of a country's tax base. We sketch a baseline model of what determines a country?s tax revenue as a share of GDP. We then turn to our primary focus: why do developing countries tax so little? We begin with factors related to the economic structure of these economies. But we argue that there is also an important role for political factors, such as weak institutions, fragmented polities, and a lack of transparency due to weak news media. Moreover, sociological and cultural factors—such as a weak sense of national identity and a poor norm for compliance—may stifle the collection of tax revenue. In each case, we suggest the need for a dynamic approach that encompasses the two-way interactions between these political, social, and cultural factors and the economy.
This paper reviews the literature on taxation of the informal economy, taking stock of key debates and drawing attention to recent innovations. Conventionally, the debate on whether to tax has frequently focused on the limited revenue potential, high cost of collection, and potentially adverse impact on small firms. Recent arguments have increasingly emphasised the more indirect benefits of informal taxation in relation to economic growth, broader tax compliance, and governance. More research is needed, we argue, into the relevant costs and benefits for all, including quasi-voluntary compliance, political and administrative incentives for reform, and citizen-state bargaining over taxation.
Purpose
– The purpose of this paper is to empirically test legitimacy theory by comparing the corporate social responsibility (CSR) disclosures of tax aggressive corporations with those of non‐tax aggressive corporations in Australia.
Design/methodology/approach
– A unique sample of 20 Australian corporations accused by the Australian Taxation Office of engaging in tax aggressive activities during the 2001‐2006 period was hand‐collected. These 20 tax aggressive corporations were then matched with 20 non‐tax aggressive corporations (based on industry classification, corporation size and time period). This process generated a choice‐based sample of 40 corporations for empirical analysis. Using content analysis techniques, financial accounting data were gathered from the Aspect‐Huntley database and CSR disclosures were individually measured for each corporation in the sample. Various statistical techniques were then used (e.g. paired sample statistics, Pearson correlation analysis and ordinary least squares regression analysis) to test legitimacy theory.
Findings
– Overall, the empirical results consistently show a positive and statistically significant association between corporate tax aggressiveness and CSR disclosure, thereby confirming legitimacy theory in the context of corporate tax aggressiveness.
Originality/value
– The paper provides empirical evidence in support of legitimacy theory as an explanation for why specific corporations disclose more CSR‐related information than others. Additionally, to the best of the authors' knowledge, the paper is one of the first to document an empirical association between corporate tax aggressiveness and CSR in the literature.
Issues of taxation and development, which have long been a central concern of the IMF, have attracted wider and renewed interest in the last few years. This paper reflects on three broad lessons of experience: that developing countries differ vastly in tax matters, and in ways that are less than fully understood; that the history of ‘big ideas’ in guiding tax reform for developing countries is decidedly mixed; and that the value of the emphasis often placed in this context on ‘informality’ is decidedly limited. It also asks whether ideas of ‘state building’ emphasized in some of the recent literature are likely to lead to practical advice much different from that commonly offered now.
The central question in taxation and development is: "how does a government go from raising around 10% of GDP in taxes to raising around 40%"? This paper looks at the economic and political forces that shape the way that fiscal capacity is created and sustained. As well as reviewing the literature and evidence, it builds an overarching framework to help structure thinking on the topic.
Problems of taxation, in connexion with economic development, are generally discussed from two different points of view, which involve quite distinct, and often conflicting, considerations: the point of view of incentives and the point of view of resources . Those who believe that it is the lack of adequate incentives which is mainly responsible for insufficient growth and investment are concerned with improving the tax system through the granting of additional concessions of various kinds, with less regard to the unfavourable effects on the public revenue. Those who believe that insufficient growth and investment is mainly a consequence of a lack of resources are chiefly concerned with increasing the resources available for investment through additional taxation, even at the cost of worsening its disincentive effects.
This paper offers interview data on the tax compliance behavior of small cash businesses. We find that such businesses systematically underpay income, employment and sales taxes through income underreporting. The results show that participation in a parallel cash economy facilitates tax evasion and that cash business owners seek out sympathetic tax preparers. We also find that norms and opportunity, but not equity or tax law complexity, strongly influence such decisions to underreport income. The behavior patterns indicated by our data suggest specific policy tactics in the effort to close the tax gap.
When individuals embark on their careers they not only become acculturated into their occupational sectors' day-to-day norms and practices, but also their taxpaying ones. Although the research on taxpaying cultures is still in its infancy, understanding more about taxpaying cultures could improve our understanding of the processes underlying tax compliance. To this end, this study aimed to build a detailed picture of the taxpaying culture (i.e. the norms and values) of one business sector—the hairdressing/beauty industry. Nineteen small business and self-employed hairdressers/beauticians were interviewed and a variant of Grounded theory was used to uncover the main themes that ran through the interviews as a whole. The main themes that emerged—which appear to characterize this sector's culture—include a reliance on accountants/tax advisors, the notion of an acceptable level of cash-in-hand payments, and the use of different mental accounts for different types of income. Although some of these themes have already arisen in the small business literature they have often been couched in individualistic terms. We build a case that these issues are more cultural than individual—they are tied to occupational group membership as they are socially constructed within occupational groups and are a key component of the group's taxpaying culture. Implications and directions for future research are discussed. Copyright © 2007 John Wiley & Sons, Ltd.
We challenge the conventional definition of corruption as the abuse of public office for private gain, making a distinction between legal and illegal forms of corruption, and paying more attention to corporate patterns of corruption (which also affect public corruption). We undertake to identify general determinants of the pattern of legal and illegal corruption worldwide, and present a model where both corruption (modeled explicitly in the context of allocations) and the political equilibrium are endogenous. Three types of equilibrium outcomes are identified as a function of basic parameters, namely initial conditions (assets/productivity), equality, and fundamental political accountability. These equilibria are: i) an illegal corruption equilibrium, where the political elite does not face binding incentives; ii) a legal corruption equilibrium, where the political elite is obliged to incur on a cost to deceive the population; and iii) a no-corruption equilibrium, where the population cannot be deceived. An integral empirical test of the model is performed, using a broad range of variables and sources. Its core variables, namely regarding legal corruption (and other manifestations of corporate corruption) come from an original survey developed with the World Economic Forum (in the Executive Opinion Survey 2004 of the Global Competitiveness Report). The empirical results generally validate the model and explanations. Some salient implications emerge.
Africa's willing taxpayers thwarted by opaque tax systems
- R Aiko
- C Logan
Aiko, R. & Logan, C. 2014 (March 5). Africa's willing taxpayers thwarted by opaque tax systems,
corruption. Afrobarometer, Policy Paper No. 7.
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Voters to decide if 'head tax' can ease headaches in Google's home. Houston Chronicle
Associated Press. 2018. Voters to decide if 'head tax' can ease headaches in Google's home. Houston
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Avoiding tax may be legal, but can it ever be ethical? Rather than hiding behind the business case for tax avoidance, companies need to be transparent about their tax planning
- P F Back
Back, P.F. 2013 (April 23). Avoiding tax may be legal, but can it ever be ethical? Rather than hiding
behind the business case for tax avoidance, companies need to be transparent about their tax
planning. https://www.theguardian.com/sustainable-business/avoiding-tax-legal-but-everethical
Tanzania jolts mine firms
- N Bariyo
- J Mcnish
Bariyo, N. & McNish, J. 2017. Tanzania jolts mine firms. The Wall Street Journal, CCLXX(29), Friday,
August 4, p. B5 (Business News).
Improving tax administration in developing countries
- R M Bird
Bird, R.M. 2015. Improving tax administration in developing countries. Journal of Tax Administration,
1(1): 23-45.
Corporate tax minimization and stock price reactions
- K Blaufus
- A Mohlmann
- A Schwabe
Blaufus, K., Mohlmann, A. & Schwabe, A. 2016 (April). Corporate tax minimization and stock price
reactions. arqus Discussion Paper No. 204.
http://www.arqus.info/mobile/paper/arqus_204.pdf