Society expects companies to take into account the economic, environmental, and social effects of their operations and activities. The concept of corporate social responsibility (CSR) refers to the operations or actions of companies that are above or independent of the limits or minimum requirements set by legislation.
The economic purpose of a company and its responsibilities towards shareholders and debtors, first and foremost, is a natural starting point in reviewing the responsibilities. Also other stakeholders such as employers or public entities as tax collectors have economic requirements and expectations. Responsibility in the context of tax issues has become the topic of greater attention, with a number of stakeholder groups actively reviewing the approaches that companies take to their tax strategies and tax planning activities.
In this article CSR is reviewed especially in the context of taxation. Does CSR have any significance and importance in the context of tax law and especially income taxation? Does CSR set limits on the tax planning of companies, or is there an obligation to pay any more taxes than what has to be paid according to the law and the tax treaties? While the concept of CSR is not a legal one, neither is the approach for these questions in this article only a legal one.
Attitudes towards taxes are often contradictory. On the one hand, taxes are like any other costs for a company, but on the other hand, they are an economic contribution to the society in which the business is conducted.
The phrase “aggressive tax planning”, as opposed to regular or “acceptable” tax planning, has been used on several occasions recently. Taking a purely technical approach to tax planning is unlikely to protect companies from charges of irresponsibility and associated reputational damage. Aggressive tax planning can be characterized, for instance, by an intensive use of legal and financial tools, establishments in foreign tax havens, unbalanced capital structures and transfer prices, or a disingenuous use of tax treaties.
Still, aggressive tax planning is not a legal concept so there is no legal definition for it. Instead, the question is more or less about where to draw the line of moral acceptability, which runs on the inside of the tax planning area. From the CSR point of view, aggressive tax planning can be defined as actions taken by taxpayers which are in the line of requirements of tax law, but which do not meet the reasonable and justified expectations and requirements of the stakeholders.
Armour, John - Hansmann, Henry - Kraakman, Reinier: What is corporate law? In “The Anatomy of Corporate Law”, Oxford University Press 2009, pp. 1-34.
Avi-Yonah, Reuven S.: The Cyclical Transformations of the Corporate Form: A Historical Perspective on Corporate Social Responsibility. Delaware Journal of Corporate Law 2005, pp. 767-818.
Avi-Yonah, Reuven S.: Corporate Social Responsibility and Strategic Tax Behavior. University of Michigan Law School 2006. Webpage: http://www.itdweb.org/documents/Avi-Yonah.pdf (7.12.2013).
Carroll, Archie B.: A Three-Dimensional Conceptual Model of Corporate Social Performance. Academy of Management Review 4/1979, pp. 497-505.
Carroll, Archie B.: Corporate Social Responsibility: Evolution of a Definitional Construct. Business & Society 3/1999, pp. 268-295.
COM(2001) 366 final. Green Paper Promoting a European framework for Corporate Social Responsibility (Brussels, 18.7.2001).
COM(2011) 681 final. A renewed EU strategy 2011-14 for Corporate Social Responsibility (Brussels, 25.10.2011).
COM(2013) 207 final. Proposal for a Directive of the European Parliament and of the Council amending Council Directives 78/660/EEC and 83/349/EEC as regards disclosure of nonfinancial and diversity information by certain large companies and groups ( Strasbourg, 16.4.2013).
COM(2013) 814 final. Proposal for a Council Directive amending Directive 2011/96/EU on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (25.11.2013).
C(2012) 8806 final. Commission recommendation of 6.12.2012 on aggressive tax planning (Brussels, 6.12.2012).
C(2013) 2236 final. Commission decision of 23.4.2013 on setting up a Commission Expert Group to be known as the Platform for Tax Good Governance, Aggressive Tax Planning and Double Taxation. C(2013) 2236 final (Brussels, 23.4.2013).
Fuller, Lon L.: The Morality of Law. Yale University Press, New Haven 1964.
GRI G3.1. Sustainability Reporting Guidelines.
GRI G4 Part 1: Reporting Principles and Standard Disclosurepp. Global Reporting Iniative 2013.
GRI G4 Part2: Implementation Manual. Global Reporting Iniative 2013.
HE 109/2005 vp. Hallituksen esitys Eduskunnalle uudeksi osakeyhtiölainsäädännöksi.
Honoré, Tony: The Dependence of Morality on Law. Oxford Journal of Legal Studies 1993, pp. 1-17.
Jensen, C. Michael - Meckling, William H.: Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure. In “Firms, Organizations and Contracts: A Reader in Industrial Organization” (ed. Peter J. Bucklay and Jonathan Michie), Oxford University Press, Oxford 1996, pp. 103-167. (Jensen - Meckling 1976/1996)
Jones, Thomas M.: Corporate Social Responsibility Revisited, Redifined. California Management Review 1980, pp. 59-67.
Kaitila, Esa: Teollisuuden sosiaalitoiminta yhteiskunnallisena ilmiönä. Liikemaailma 7/1947 (offprint)
Knuutinen, Reijo: Muoto ja sisältö vero-oikeudessa - erityistarkastelussa rahoitus- ja sijoitusinstrumentit. Suomalainen Lakimiesyhdistys, Helsinki 2009.
Knuutinen, Reijo: Veron minimointi ja yrityksen yhteiskuntavastuu. Verotus 2/2013, pp. 177-191.
Knuutinen, Reijo: Verotus ja yrityksen yhteiskuntavastuu. Lakimiesliiton kustannus, Helsinki 2014.
Lehto, Sakari T.: Muistikuvia ja merkintöjä: Teollisuuden piirissä koettua. WSOY, Helsinki 1996.
Letto-Vanamo, Pia: Oikeuden ja oikeudenmukaisuuden historiallinen suhde. In “Demokraattisen oikeuden ehdot” (ed. Samuli Hurri). Tutkijaliitto, Helsinki 2008, pp. 61-72.
Millon, David: Theories of the Corporation. Duke Law Journal 1990, pp. 201-262.
Musgrave, Richard A. - Musgrave, Peggy B.: Inter-nation equity. In "Modern Fiscal Issues; Essays in Honor of Carl S. Shoup", University of Toronto Press 1972, pp. 63-85.
Mönkkönen, Mauri: Mäntän historia 1948-1992. Gummerus Kirjapaino Oy, Jyväskylä 1998.
OECD: Guidelines for Multinational Enterprises 2011 Edition.
OECD: Addressing Base Erosion and Profit Shifting, OECD Publishing 2013. Webpage: http://dx.doi.org/10.1787/9789264192744-en (13.12.2013). (OECD 2013a)
OECD: Action Plan on Base Erosion and Profit Shifting, OECD Publishing 2013. Webpage: http://dx.doi.org/10.1787/9789264202719-en (13.12.2013) (OECD 2013b)
OECD: Annual Report on the OECD Guidelines for Multinational Enterprises 2013.
Ostas, Daniel T.: Cooperate, Comply, or Evade? A Corporate Executive’s Social Responsibilities with Regard to Law. American Business Law Journal 4/2004, pp. 559-594.
Oxford Handbook, The Oxford Handbook of Corporate Social Responsibility. Edited by Andrew Crane - Abagail McWilliams - Dirk Matten - Jeremy Moon - Donald S. Siegel. Oxford University Press, 2008.
Porter, Michael E. - Kramer, Mark R.: Strategy and Society. The Link Between Competitive Advantage and Corporate Social Responsibility. Harvard Business Review 2006, pp. 78-92.
Porter, Michael E. - Kramer, Mark R.: Creating Shared Value. Harvard Business Review 2011, pp. 62-77.
Posner, Richard A.: Economic Analysis of Law (Fourth edition). Little Brown, Boston 1992.
Prebble, John: Should Tax Legislation Be Written from a Principles and Purpose Point of View or a Precise and Detailed Point of View. British Tax Review 2/1998, pp. 112-123.
Ring, Diane M.: One Nation Among Many: Policy Implications of Cross-Border Tax Arbitrage. Boston Collage Law Review 2002, pp. 79-175.
SustainAbility (2006). Taxing issues: Responsible business and tax.
Vitols, Sigurt: Varietes of Corporate Governance: Comparing Germany and the UK. In “Varieties of Capitalism: The Institutional Foundations of Comparative Advantage” (ed. Peter A. Hall ja David Soskice), Oxford University Press, Oxford 2001, pp. 337-360.
Weber, Dennis: Tax Avoidance and the EC Treaty Freedoms: A Study of the Limitations under European Law to the Prevention of Tax Avoidance. Kluwer Law International, The Hague 2005.
World Commission on Environment and Development: Our Common Future. Oxford University Press 1987.