Good Tax Governance: A Matter of Moral Responsibility and Transparency

What is it about?

Multinational corporations’ tax planning practices which are within the limits set by law but do not seem to qualify as morally responsible behaviour anymore. We offer 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. We address 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.

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Why is it important?

Multinational corporations’ tax practices are hotly debated nowadays. Multinationals are accused of not paying their fair share of taxes. This article adds to a more informed debate and argues for more transparency.