Good tax governance: International corporate tax planning and corporate social responsibility - Does one exclude the other?

A.G. Jallai

Research output: ThesisDoctoral Thesis

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International corporate tax planning and corporate social responsibility are topics that might not seem to have common ground at first sight. The aim of this research was to prove the contrary. This research addressed international corporate tax planning from various perspectives, such as regulation, ethics, business, and society.

Not all forms of legal tax planning are considered (socially) legitimate anymore. Corporate tax planning is a complex issue: on the one hand, it is common corporate practice to keep costs low. On the other hand, corporations have to contribute to society and common goods by paying (corporate income) taxes as any other member of society. Not all kinds of corporate tax practices are (socially) illegitimate per se. Tax planning can be carried out in various forms. This research focused on tax planning activities that remain within the boundaries of the law (thus tax evasion is not part of this research). Tax planning activities that remain within the law can be divided into a number of sub-categories based on a degree of social legitimacy: tax mitigation, tax avoidance and aggressive tax planning. Even though all of the different kinds of behaviour described by these concepts are legal, not all of these practices are socially legitimate, because, in the case of tax avoidance and aggressive tax planning, multinationals fail to contribute their fair share to society.

As a result of legal tax planning that is not always socially acceptable, discussions of morality have entered the picture. Taxes provide funds for governments to offer essential public goods and to redistribute wealth among citizens. Taxes build a basis for a society. The obligation to pay taxes originates from the law, but in a society morality also guides individuals’ behaviour. The legal system should codify public morality; however, it will never be able to do so exhaustively. Therefore, legal rules in a complex society inevitably leave room for different interpretations and choices with regard to the use of the system of tax rules. This suggests that, in case legal rules fall short, morality should fill the gap. This research linked morality to CSR, which can be seen as a tool for multinationals to balance conflicting interests in a moral way.

Some might believe that various other legal obligations, such as corporate governance rules, restrict corporations from opting for a moral business practices if it decreases shareholder value (in the short term). However, based on the analysis of corporate governance in this research, I am convinced that, as long as managers act in the best interests of the corporation, they do not breach their fiduciary duty when engaging in good tax governance. Furthermore, companies that have already taken on the responsibility to engage in CSR should not claim that they behave responsibly while minimizing their tax obligations. This research argued that socially responsible corporations should engage in good tax governance, which consists of substantive (paying fair share; developing tax codes of conduct) and procedural (transparency) elements.
Original languageEnglish
Awarding Institution
  • Tilburg University
  • Gribnau, Hans, Promotor
  • Peters, Cees, Co-promotor
Award date23 Sept 2020
Print ISBNs978 94 6167 423 4
Publication statusPublished - 23 Sept 2020


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