Nick Shaxson ■ 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.


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