Backsliding on tax ‘could undermine CSR policies’

Businesses have been urged to adopt defensible and responsible positions on the payment of taxes – or risk pulling the rug from under their overall corporate social responsibility strategies.

A new report by the UK-based Corporate Citizenship consultancy outlines a ‘tax map’, which charts six stages of tax responsibility, from ‘risking evasion’ to ‘principled obligation’.

To get from the one end, whereby firms flirt dangerously with illegal, fraudulent or deceptive behaviour, to the other, in which companies pay more tax than the legal minimum for ethical or political reasons, Corporate Citizenship recommends five steps.

The steps are: gathering data with a clear and detailed breakdown of all types of tax, by jurisdiction; a review of tax decision-making processes, including an audit of tax avoidance practices; a decision on general principles of taxation, made before the drafting of any tax policy; the development of a consistent, detailed policy with strong governance; and a strategy to clearly communicate the tax position in straightforward language that can be understood by employees and customers as well as tax authorities.

At present, Corporate Citizenship says, there is a ‘vacuum’ at the heart of many CSR approaches to tax, with ‘little clarity over principles, little understanding of internal policy and fewer still examples of effective communication’.

Pointing to increasing civil campaigning and unrest in the UK surrounding corporate tax evasion and avoidance, the report says the business position on tax must be a priority, because it is undermining CSR strategies and trust in companies.

The document says there are, however, some good examples of an emerging responsible approach to tax among multinationals. British American Tobacco is lauded for its support of a ‘gradual and predictable’ increase in tobacco taxes, while ExxonMobil is praised for making tax a good news story by comparing its UK bill to government expenditure — which last year, the company claims, accounted for about one per cent of total state revenues.