Global companies tax avoidance and CSR - Essay Example

In the present times, companies save tax through CSR activities (Barker, 2012). This study aims at discussing the other side of the coin. CSR initiative by the companies is appreciated and motivated by government and regulatory bodies, but there another side of this aspect too, which is negative. The discussion would be evaluating the evolution of CSR from risk management to tax avoidance tool, with respect to the IT, Internet, software and electronics industry, which would mainly drawing examples of those famous companies that has been criticised for their tax avoidance through CSR activities (Elkingtom, 1998).

These Companies offer funds on relief and for service to the society. However, the actual amount of fund spent for CSR activities are lesser than the amount show, but these companies get tax benefit on the amount shown by them for CSR activities. This is a general way how these companies try to avoid tax through social services. In order to discuss this issue in detail topics like drivers behind changing CSR environment, voluntary CSR initiatives, and support of the policy environment would be discussed, so as to understand the theme of this study.

Corporate Social Responsibility (CSR) Policies and Tax Avoidance According to Organization for Economic Co-operation (OECD), government of every country needs to revise their tax-system, so that they can trap the multinational companies, who dodge the corporate tax. These companies easily shift their profits and offshore and the tax authorities of the country lose billions of money which form an integral part of revenue for the government. Tax has been a missing element in the framework of CSR.

CSR activities should also have tax obligations or compliance. Tax is portrayed as a cost, whereas it is a part of profit that is distributed back to stakeholders of the company. This reveals that the companies are not only generating revenue from investor’s capital but also from the funds of the society in which they operate. These funds are use for the development of the infrastructure of the country, growth of the society, education facilities, etc (Elkingtom, 1998) Companies like Google Inc, Amazon.

com, etc were severely criticised for tax avoidance in the name of CSR activities. Corporate tax was not such a gripping subject for people previously, and the accountants of these companies easily found loop holes to hide their tax amounts behind social activities done by the company for the society (The Guardian, 2013). Google UK and Amazon are the most talked about companies who were found to be involved in tax evasion activities with the excuse of social activities. Google dropped their motto “Don’t Be Evil” suspiciously and 1 percent of the profit of the company, which was given for charity, was also stopped quietly, without any information.

The company was accountable to pay a tax amount of 1.2 billion pounds, while it paid ?600,000. It channelled its revenue to Ireland, which has a more liberal tax system than UK (Barker, 2012). The issue of tax avoidance and CSR is a matter of corporate accountability. This has gained significant in the recent years due to several reasons. Firstly, these companies are acquiring more and more power, and in many cases they even become more powerful in the location than the regulatory body. Many authors blame issues like welfare standards, environment, labours, and over-commercialisation for such a scenario.