Want to be seen as socially responsible? Pay more tax

People get annoyed when they hear that companies making billions pay little tax

Apple: staggeringly cold-blooded in the elaborate cross-border strategies it employs to minimise its corporate tax liability. Photographer: Simon Dawson/Bloomberg

Apple: staggeringly cold-blooded in the elaborate cross-border strategies it employs to minimise its corporate tax liability. Photographer: Simon Dawson/Bloomberg

Mon, Oct 21, 2013, 15:58

Last week was sustainable business week. It is an annual affair organised by Business in the Community and is a series of events aimed at showcasing and “celebrating” the corporate social responsibility (CSR) initiatives of its member firms, which include most of Ireland’s blue chips.

The highlight is a CEO breakfast forum, which was held last Thursday. One suspects that business breakfasts are a bit like marmite: the world is divided into those who hate them and those who love them. But the great and the good turned out last Thursday in significant numbers to see seven of their own awarded the Business Working Responsibly Mark, an independently audited assessment of their CSR practices.

Attendance was up on previous years and Business in the Community will expand next year’s breakfast into a longer event.

Among other things this is a very positive signal about the turnaround in the economy. When things get tough, CSR usually drops down the agenda except at businesses that really, really believe in it. They are few enough.

Once businesses start to come back up for air, however, they can afford to engage with the notion of CSR.

It will be interesting to see the extent to which CSR has moved on in the interim and how much appeal the new CSR agenda has for Irish business.

You would have to imagine that if you conducted a poll asking people what aspects of corporate behaviour concern them the most you would find tax – or rather the lack of it – coming in close to the top.

This is a huge issue and has been for the best part of a year as taxpayers in Europe’s big economies started to feel the austerity pinch in a fashion we have become all too familiar with. Unlike Ireland – where there is amazing consensus around a low corporate tax rate – the notion of large corporations paying little or no tax generates great anger elsewhere in Europe.

The tax practices of large companies are under the spotlight as never before. The elaborate cross-border strategies employed by US technology companies have come in for particular scrutiny. It’s fair to say that their responses would not earn them a Business Working Responsibly Mark any time soon. They have ranged from the staggeringly cold-blooded in the case of Apple to the patronising in the shape of Starbucks.

Inescapable truth
You could spend a lot of time arguing the point about whether, as many hold, companies have a duty to their shareholders above all and thus should not give their money away in tax. But it’s not really necessary.

The inescapable truth is that people, otherwise known as customers, get really annoyed when they hear that companies making billions don’t pay tax.

You can publish all the glossy CSR reports you want, you can buy as much green energy as you can find and you can recycle the water in the canteen 50 times, but if you don’t pay tax it’s very hard to argue these days that you are a good corporate citizen.

Companies may not want to accept this but the world has moved on. Politicians get it. Hence the job given to the Organisation for Economic Co-operation and Development to come up with proposals to address some of the structural failings that allow big multinationals to game the world when it comes to tax.

What will come of it? Who knows? But politicians clearly understand the need to be seen by their electorates to be doing something.

The other group that seems to have got it when it comes to corporate tax avoidance are the people who invented it. Talk to a tax partner in a big Dublin professional services firm and they will tell you that something is going to have to give.

One of the speakers at last week’s breakfast – the managing partner of one of the big accountancy practices – predicted that boards will be under pressure to set what will in effect be socially acceptable target tax rates rather than simply looking to pay no tax.

Hopefully we will soon see the day when along with pictures of wind turbines and company-funded orphanages in Africa, the glossy CSR report will contain a few pages on why the business pays the amount of tax it does and why they feel it is ethically justified.

That would be socially responsible.

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