Ethics and governance in the European Financial centers

KPMG recently published a paper that examines the relationship between a company ’s approach to its tax liabilities and its attitude to corporate social responsibility (CSR).

As explained in the abstract, the paper adopts the view that CSR is a legitimate interest of business. It argues that, because CSR is a way of doing business rather than an ‘add on ’ to normal business processes, companies should consider how their chosen approach to CSR applies to all aspects of their activity,including the management of their tax liability. They should then be in a position to give a reasoned justification of their approach to key tax issues such as the use of tax minimisation techniques,which is consistent with their approach to other CSR issues. Possible challenges to this approach are also considered.
Quantum is the only significant variable when assessing a company ’s tax contribution; in contrast to many other aspects of its business activity, the relevant question as regards its tax liability is not how it pays it, but only how much it pays. Accordingly the paper goes on to consider how CSR principles might be applied to the principal means by which a company may reduce its tax payments: ie, broadly, tax avoidance and tax planning (which are defined for the purpose of the discussion). While tax evasion is another means by which companies sometimes reduce their payments, CSR factors are not considered to be relevant in this context because such behaviour is already ruled out on more fundamental ethical grounds.

The paper sometimes sounds strange.

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