The Relationship Of Tax Avoidance With Corporate Social Responsibility

Tax avoidance has become a massive topic of discussion over the past few years, given the current global economic conditions and the cuts to the public sector by the government as a result. This led to increased anger from the public who perceive avoidance by many of the country’s wealthiest people in a time of austerity as greed. Perhaps the most notable demonstration of this anger can be seen in the actions of the group UK Uncut, who for the past year have been organising protests at shops owned by retail tycoon Philip Green who, as the poster boy for tax avoidance, paid a £1.2 billion dividend to his Monaco-resident wife.

There are conflicting expectations of the nature of a company’s responsibilities to society. However, those companies that undertake what may be termed ‘Corporate Social Responsibility’ must decide; what are the actual social responsibilities of these companies? I will present a possible paradigm. Also, I will look at the benefit to the business that employs proper management as compared the business with poor management. This research paper describes my view of corporate social responsibility and compares the social responsibilities of Delta Air Lines and Spirit

The United States economy is heading for one of the biggest crashes since 2008. With increased globalization, businesses in America have adapted and grown considerably, but not necessarily for the better. In particular, there are two areas in which certain businesses operate that are risking an unsustainable U.S. economy. That is to say through devious tax avoidance schemes businesses have amassed large offshore stockpiles, which are exempt from U.S. tax deductions. Furthermore, Wall Street has grown exponentially, while increasing volatility in the economy. These two problems beg the question if either are sustainable, and if not, what type of solutions could possibly be implemented, to secure a prosperous United States economy.

Based on the movie “A Christmas Carol 2009”, issue that we found that relevant to the business ethic is the corporate social irresponsibility (CSI). Corporate social irresponsibility (CSI) refers to the dark side, as it investigates the wrongful and damaging business decisions that managers might take. Corporate social irresponsibility to concepts such as corporate culpability and undesirability and irresponsibility, in its various forms such as corruption, bribery, environmental degradation, and social injustice, is most frequently found in poorer regions, those with fewer social resources or educational opportunities (Sanchez‐Runde et al., 2013, p. 690). Because of corporate social irresponsibility, the business performance decline, customer dissatisfaction and low profitability will be happen.

Petrenko. A. Corporate social responsibility [Power Point Slides]. Retrieved from Lecture Notes Online Web site: https://moodle.yorku.ca/moodle/course/view.php?id=39261

In an attempt to answer a new question, “Is Corporate Social Responsibility a myth?” this paper also tries to evaluate what Poruthiyil (2013) eloquently states:

Archie B. Carroll created a pyramid model to describe the economic responsibility, legal responsibility, ethical responsibility and philanthropic responsibility that a company should have toward the global economy (Kreitner and Kinicki, 2013). Within these four domains, a corporation is expected to be profitable, be legal, be ethical and be a good corporate citizen. There are expectations of the model in which economic, social and environmental responsibilities are fulfilled simultaneously (Shum and Yam, 2011). However, it is not feasible to expect the economic responsibility to automatically translate into the social responsibility aspect. Corporations can be led to engage in social responsibility voluntarily to achieve social good when appropriate legal and ethical influences are established (Shum and Yam, 2011).

On the other hand, people who consider tax avoidance a right of an individual or a company consider aggressive anti tax avoidance attitude of government to be socialist in nature instead of democratic. They argue that it is the right of any person to keep the maximum amount of money that he or she earned and pay least amount of tax required. They think that questioning the morality of a tax avoider is not appropriate because he has more right to that money than the government and instead of questioning the morality, government should lower tax rates, simplify tax process and legislate accordingly (Ryan Bourne, 2012).

(ii) Shareholders invest their money into firms to maximise profits, not to act on “social responsibilities”

jEthics can be addressed within financial performance in stating how companies remain consistent by implementing corporate social performance and how recent trends can impact the result. In the research article ‘A Study of the Link Between a Corporation’s Financial Performance and its Commitment to Ethics’ Verschoor (1997). He presents the latest trends of companies that are within an ethical perspective. “26.8% of US 500 largest corporations commit to ethical behaviour towards their stakeholders or emphasise compliance with their code of conduct.”(p.1509). Although a small proportion of major companies in US apply ethics, this demonstrates that competition is considered to be a significant factor through financial performance. Hence, in establishing corporate social responsibility this examines the level of ethics within the balance of standards between right and wrong through a financial performance perspective.

Corporate Social Responsibility (C.S.R.) is a theory practiced in the business sphere since fifty years. It refers to the duty of business organizations to adopt certain activities that will benefit the society in some way. Charity, health-awareness campaigns are few examples that a business undertakes to fulfil its objectives of C.S.R. According to this ideal, it is important for various corporations today to undertake such social activities, apart from merely focusing on their objective of profit maximization. But, is it an obligation that is most important than other objectives of business? This thought further leads us to another significant question – In contemporary settings, should corporations be guided by the concept of C.S.R.?

Milton Friedman was a 20th century American economist who advocated free-market capitalism. In 1970 he submitted an editorial article entitled “The Social Responsibility of Business is to Increase its Profits” to the New York Times. In the article, Friedman argues that in free market systems it is nonsensical to make corporate entities adhere to “social responsibilities of business” pushed by activists, as corporations are artificial in nature, and thus do not have any social responsibilities other than to make money for the shareholders of the company. I will argue against this paper and support the claim corporations do in-fact have moral and ethical obligations to more than just their shareholders, and that many individuals have their stakes and livelihoods embedded within the acts of corporations. As well, the idea in the article that corporations are not moral agents has led to unsavory violations of human rights across the world, failing Kant’s second formulation of the Categorical Imperative, as well as not satisfying Act Utilitarianism. Thus, corporations, and individuals within those corporations, possess considerable ability to make ethical decisions that have great impact to many people, culminating in the truth that corporations have moral status.

Milton Friedman was an American economist, statistician and writer, who had a massive impact on the research agenda of the economics profession. His famous words “the only responsibility of business is to increase its profits” (Friedman, Milton. 1970) led to many controversial debates on whether businesses should have ethics or if profit should be their main goal. Corporate social responsibility has many definitions, as its interpretation is quite loose, so I have chosen one that relates the most to this essay, given by the World Business Council for Sustainable Development, in 2000: “Corporate social

The idea that morally dubious goals may be legitimate inside capitalism will be discussed in light of a tax avoidance case study. Apple, a multinational technology company, has avoided paying its fair amount of income tax for years. This paper will consider the structural embeddedness of Apple’s legitimised goal—the maximisation of profit—through the ‘Double Irish Dutch sandwich’ tax haven model. Durkheim’s theory of collective conscience was used in explaining the legitimisation of the company’s profits-driven goal, and how its amorality becomes apparent outside the economical sphere. This paper will also discuss the interconnected nature of the harm and benefits in the deal made between Ireland and Apple. The association between legitimations of Apple’s conduct and its socially challenging behaviour has been analysed to be ambiguous in the letter of the law. The conclusion will shed light on the morally grey area of a company’s responsibility to its shareholders versus the needs of the community.

Crane, A. and Matten, D. (2010) ‘Corporate social responsibility’, (3rd edition) Business Ethics. Oxford: Oxford university press, pp.51-60