The corporate social responsibility of paying taxes
Categories: CSR, Sustainability
Turn to any media this week and you can’t avoid the latest tax-dodging revelations from the #ParadisePapers.
Right royal tax shock
Some names don’t surprise, but the Queen and Bono were real shockers. Her Majesty is the epitome of public duty and paying taxes is a public duty – that’s why she started the royal precedent of paying them. Bono – well, he’s just seen his lifetime’s work as rock royalty standing up and speaking out on behalf of the poor vaporise like a wispy Caribbean cloud.
I’m convinced that neither genuinely knew what their money managers were doing with their millions, but it’s no excuse. Not in this day and age. Keeping your hard-earned reputation intact is as important as maximising the value of your hard-earned income.
Supply chain liability
Fame and fortune are closely intertwined. To preserve both, you have to choose your friends in business carefully.
By working together, a client and supplier become part of each other’s value chain. If one of the links falters, the whole chain is weakened. And high-profile clients can expect to be publicly stung for their supplier’s bad behaviour.
But here’s the thing – as the lawyers keep repeating - tax avoidance isn’t illegal, tax evasion is. So why the uproar?
Unfair and immoral
The public outrage is because avoiding tax on this scale, by individuals and corporations who can most afford to pay it, is regarded as unfair and immoral by the majority.
Taxes fund public services and essential social security. With tax revenues falling, the government’s stock response is to make ‘savings’. With no end in sight for continued cuts, public services in the UK are on their knees. Universal Credit is universally disliked, so too are the cuts in tax relief for millions of middle-income hard-working families.
Thanks to investigative journalism and social media, there’s no ‘hush-hush’ about the financial affairs of the superrich anymore. Available figures show that treasury income lost through tax avoidance is massive. Revenue that could be spent on the NHS, schools, policing, social housing or the environment. Services that would benefit millions. The millions who see legal and financial loopholes as unfair and the exploitation of these as immoral.
Bring back CSR!
Over the decades that I’ve been working in the field of corporate social responsibility (CSR), there’s been a noticeable shift away from the term ‘CSR’ onto corporate responsibility (CR) and sustainability. I’ve always argued the term doesn’t matter as they all mean the same thing: the triple bottom line of economic, social and environmental impacts or people, planet, profit. But I accept that’s not a universal view.
For many, CSR implies a predominant focus on community involvement. Too much fluff, not enough hard business. Those who use the term ‘corporate responsibility’ often talk about ‘doing the right thing’ for the business – including employees - and the environment. Sustainability is often confused with environmental sustainability or economic viability.
Maybe it’s time to bring CSR back into fashion to refocus business minds on social responsibilities – not only to employees and the local community, but to society as a whole. Through full and fair payment of taxes that governments can spend on public services.
Afterall, long-term economic sustainability depends on it. Investors, employees and customers are demanding greater transparency of the companies they do business with. If they can’t trust you, they’ll go elsewhere. And they’ll tell others why they are doing so.
For example, the launch of the Apple iPhone X has been completely overshadowed by the #ParadisePapers. Apple keeps telling us they “are the world’s biggest taxpayer” and quotes the sum total of their tax payments. It hasn’t taken the experts long to calculate, and communicate, that’s only a 5% corporation tax rate. Compare that with the 20% rate my micro-enterprise pays. In total, we pay way less, but as a percentage it’s a huge, unfair, imbalance.
And it’s not just Apple. You see that all the time, even in sustainability reports. Headline: Company X pays Xbn per year in taxes. Smallprint: total VAT, national insurance, employers’ contributions and corporation tax. Rarely a comparable percentage.
I think this will change. Governments will be forced to be seen to be doing something and they, in turn, will force big companies to report transparently.
For socially responsible businesses – regardless of public listing – we should see this as an opportunity to highlight our ethical credentials to customers.
As customers, we should ask more questions about the CSR performance of those who supply us and demand clearer information.