Another reason why corporations may want to be taxed properly

From The Corporation, by Joel Bakan

From The Corporation, by Joel Bakan

. . . via top-ranked U.S. tax professor Reuven Avi-Yonah, in a paper entitled  Just Say No: Corporate Taxation and Social Responsibility. It is US-focused, but has wide relevance.

This, in fact, can be seen as another justification of imposing tax on the corporation: Rather than bear any social responsibility, the corporation can by paying its taxes shift that responsibility to the state, where it belongs. 

Quite so. The paper, in fact, goes much deeper than that, and deserves reading by anyone interested in tax and corporate responsibility. It says that historically, three views of the corporation have emerged and rotated in cyclical fashion.

First, that the corporation is primarily a creature of the state. Second, that the corporation is an entity separate from both the state and from its shareholders. Third, that the corporation is merely an aggregate of its individual members or shareholders. It’s the latter view that has been dominant, he notes, and explains that under this view CSR is an illegitimate attempt by managers to tax shareholders without their consent, and leads to managers being unaccountable to the shareholders that elected them.

He then looks at aggressive tax abuses in each of the three cases and ends, by way of conclusion:

“It would thus seem that whatever view management takes of its relationship to the shareholders, to society and to the state, it is never justified in pursuing tax strategies that have as their only goal minimizing the corporation’s tax payments to the government.”

It’s a pretty powerful conclusion. And the article ends with a historical perspective:

“In the end, I believe that the only real solution is to change the attitude of major US multinationals back to where it was when the 1986 Tax Reform Act was enacted. Back then, a tax director of a major US multinational would typically see aggressive tax motivated transactions as inconsistent with CSR, and would simply reject them if brought to him. The proper response of a corporate tax director to a proposed transaction that he or she knows is not motivated by a valid business purpose (even if it can be dressed up like one and even if he or she thinks it might possibly prevail in litigation) is to just say no.”

Couldn’t have said it better ourselves.


Related Posts

The Offshore Wrapper: the Panama Papers, one year on

Photos from the Protest outside PwC 1 Embankment Place, part of the Global week of action for tax justiceWelcome to the Offshore Wrapper – your weekly update from TJN.  Happy Paniversary! This week it’s been one year since the Panama Papers were leaked, and a number of organisations around the world have been marking the occasion though the global week of action for tax justice. In London, activists from the TJN and the […]


Protesting PwC: Professionals Without Conscience

Photos from the Protest outside PwC 1 Embankment Place, part of the Global week of action for tax justiceThis week is the global week of action for tax justice and on Wednesday 5th April activists from the Tax Justice Network and Methodists for Tax Justice held a protest outside the London offices of Price Waterhouse Coopers. The global week of action for tax justice is happening one year after the release of the […]


Germany moves forward on corporate transparency

ReichstagThe Bundesrat has today voted to recommend implementing a public register of the beneficial ownership of companies and trusts.  Great news from Germany, as the country takes an important step forward towards corporate transparency.


New estimates reveal the extent of tax avoidance by multinationals

Price Waterhouse CoopersNew figures published today by the Tax Justice Network provide a country-level breakdown of the estimated tax losses to profit shifting by multinational companies. Applying a methodology developed by researchers at the International Monetary Fund to an improved dataset, the results indicate global losses of around $500 billion a year. The figures appear in a […]


Banking Secrecy in China, its related territories and Taiwan

Hong Kong from Sky 100Foreword. The Tax Justice Network is a non partisan network of experts working towards transparency, so we do not take any position about countries’ territorial and political claims. However, we do expect countries with a de jure (legal) or de facto (in practice) influence over other territories, to take responsibility for their power. We point […]


Leave a Reply

Your email address will not be published. Required fields are marked *

Back to Top