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Corporate Tax Research Papers

Paper: A moral view of tax planning

August 21, 2017
Starbucks photo by Hans Vivek.

A pair of Dutch lawyers have an interesting new article out called “Good Tax Governance: A Matter of Moral Responsibility and Transparency.”

In the article, Hans Gribnau and Ave-Geidi Jallai of Tilburg Law School discuss how aggressive tax planning may disadvantage multinational corporations by causing resentment among consumers.

The professors write that because the public views tax avoidance in moral rather than legal terms, the bad PR associated with aggressive tax planning strategies must be a key consideration for implementing a tax planning strategy.

Here’s the abstract:

“Multinational corporations’ tax practices are hotly debated nowadays. Multinationals are accused of not paying their fair share of taxes. Apparently, acting within the limits set by law is not sufficient to qualify as morally responsible behavior anymore.

This article offers ethical reflection on the current debate.The general public typically evaluates (aggressive) tax planning in moral terms rather than legal terms.

Therefore, multinationals need to reflect on their tax planning strategy next to economic and legal terms also in ethical terms. This article addresses the relationship between society, morality and taxes. The concepts of tax planning, “aggressive tax planning”, “tax evasion” and “tax avoidance” are elaborated on to exemplify the difference between a purely legal and broader approach.

In moral terms, aggressive tax planning may imply loss of integrity and trust which may entail certain costs for businesses, such as reputation damage. It will be argued that in order to improve corporate reputation and (moral) leadership, corporate social responsibility (CSR), endorsed by many corporations around the globe, is a helpful tool. Reflection on tax planning in the context of CSR – good tax governance – should foster a moral mind set and enhance accountability and transparency.”

One notable example given in the paper is Starbucks, which reconsidered its tax planning strategy after receiving a major PR hit in the UK. The company found that its tax strategy resulted in a significant loss in consumer trust, and took remedial measures to regain customer confidence.

More: Gribnau, Hans and Jallai, Ave-Geidi, Good Tax Governance: A Matter of Moral Responsibility and Transparency (May 12, 2017). Nordic Tax Journal 2017 Issue 1: 70-88. Available at SSRN.

Photo by Hans Vivek.

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