Title: Fairer Shores: Tax Havens, Tax Avoidance, and Corporate Social Responsibility
Abstract: Despite the U.S. public's tolerance of and emotional attachment to avoidance at the individual level, the avoidance practices of modern multinational corporations such as Google, Amazon, Apple, and Starbucks recently have received heavy criticism in the media. This Note argues that the doctrine of corporate social responsibility provides a logical rationale for multinational corporations to adopt antiavoidance practices, in that the harm caused by avoidance outweighs any financial benefit that accrues from these practices. Contrary to the views of some corporate leaders, avoidance can cause long-term harm to corporations and their shareholders by damaging corporate reputations and branding efforts, and also by diverting funds from national infrastructures, skewing the allocation of burdens, and causing harm to developing nations operating as havens. Fortunately, the same mechanisms that helped turn environmentally sustainable and human rights practices into corporate social responsibility norms - consumer activism, investor influence, and voluntary corporate leadership - also can be implemented to lead multinational corporations away from avoidance practices, ultimately ending the prevailing antiavoidance culture and reducing the harms caused by avoidance.INTRODUCTIONCreative planning is, for better or worse, a quintessentially American tradition.1For today's multinational corporations (MNCs),2 avoidance and the use of havens have become commonplace and even an integral part of modern business practice.3 Although these practices have recently garnered considerable media attention and public criticism worldwide,4 some corporate leaders have demonstrated remarkable nonchalance toward or even expressed pride in their avoidance practices.5 For these corporate leaders, if national governments have not (yet) made it illegal, it is not wrong; in fact, in the view of some, fiduciary responsibilities toward shareholders may even require their corporations to engage in such activities. If this attitude prevailed in all areas of business, however, corporations would still engage in environmentally harmful activities, human rights abuses, and other forms of socially irresponsible activity for the sake of maximizing shareholder value. Like other socially irresponsible activities, avoidance has the potential to harm a corporation and its shareholders by damaging the corporate reputation and inhibiting its branding efforts. It also imposes costs on individuals outside the corporation that outweigh any potential benefits to the corporation. Corporate avoidance diverts funding from national infrastructures and skews the allocation of burdens, causing particular harm to the developing nations that attempt to attract investments by operating as havens through offers of extremely low rates; banking secrecy laws; and quick, anonymous corporate registration.6 Fortunately, the same mechanisms that helped environmental and human rights advocates convince corporations to engage in nontax socially responsible activity - that is, consumer activism, investor influence, and corporate leadership - have the potential to end the corporate avoidance culture and end (or at least mitigate) the harms of international corporate avoidance.To provide some context, Part I defines tax avoidance, explains how this differs from evasion, and addresses one of the most common ways in which MNCs engage in avoidance practices: through the use of havens. Part II argues that the doctrine of corporate social responsibility (CSR) provides a separate rationale for MNCs to adopt antiavoidance practices, in that the costs of avoidance to third parties outweigh any financial benefit that accrues to a corporation engaging in avoidance. Part III argues that avoidance practices do not benefit shareholders, but rather cause long-term harm to both shareholders and MNCs by damaging the MNC's reputation and fostering an atmosphere of managerial misconduct. …
Publication Year: 2014
Publication Date: 2014-01-01
Language: en
Type: article
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Cited By Count: 60
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