What is common in Starbucks, Google and Amazon? They all have been in the news for the wrong reasons: corporate tax avoidance. Last year the British government claimed that it lost more than £1 in every £10 it tried to collect from companies to tax evasion and avoidance.
Corporate social responsibility has become a buzz word in the business word, yet a lot of corporate companies still act like they do not get the essence of it. A socially responsible company should act responsible on all areas, otherwise it will only do what is called ‘greenwashing’, just with CSR in general. Spending huge amount of money on CSR focusing on helping social sub-groups will lose its value, if the company dismisses legitimate societal needs on other areas, such the expectation of paying corporate tax in countries businesses operate. In their 2013 book The PR Strategic Toolkit, Alison Theaker and Heather Yaxley refer to Peach’s model of the impact of business on its environment, where the initial level of impact includes paying taxes, observing the law and dealing fairly. So paying corporate tax should be an absolute basic for a company.
For example, Starbucks spends a vast amount of money on CSR, including backing youth and reducing their environmental footprint.
Yet, they have been failing to pay the right amount of corporate tax, sending the message that they are rather interested in profit than giving back to society. It is not a surprise therefore that traditional and social media have been full of their corporate tax avoidance and not with their CSR programme.
With the rise of social media businesses are even better scrutinised by the public on every areas where they should be responsible. A number of CEOs have recognised this – but unfortunately not all. Steve Holiday, CEO of National Grid Group Plc., thankfully belongs to the first group:
“The regulator and government have always been major stakeholders but today there is a very different new set of stakeholders , right down to you and me. The public at large are stakeholders because they can take part in discussions on social media. The can influence our decisions and we actually want them to do that.”
According to PricewaterhouseCoopers’s Annual CEO Survey 2013, 62% of CEOs say that the tax burden is considered to be the top business threat to growth.
The motivation behind minimising the paid tax is therefore understandable. However, if they would like to have a sustainable business and they do not want to lose the business’ social license to operate in the long term, they have to acknowledge that giving back to society through taxes is essential. Otherwise, they can save money by not doing CSR because it won’t be worth anything anyway.