September 2, 2013, by ICCSR

Corporations, Taxation and Citizenship

Revelations of corporate tax minimisation, even of companies thought to be among the most socially responsible, are little short of grotesque. This is especially so as these corporations benefit from the UK’s transport, energy, communications, health and educational infrastructure which still owes so much to public expenditure.

The UK government has vowed to get tough on corporate taxation and is apparently in discussions with popular regimes for corporate tax returns with which the UK has some constitutional ties. The issue has also been the subject of EU and OECD (which describes the problem as ‘Base Erosion and Profit Shifting’) deliberations.

Few who advocate corporate social responsibility (CSR) would doubt that this is an area in which regulation is appropriate. It goes to assumptions of transparency and fairness at the heart of the concept. But even the greatest optimists might fear that this will be a fruitless exercise given the problems of global regulation and the capacity for ‘creative accounting’ on the part of those that earn money from advising corporations on their tax liability and strategy.

Does the concept of corporate citizenship have anything to offer here? This is a framework which assumes rather more than CSR or ethics as conventionally understood. Like human citizenship, it combines some basic features of status, obligations and entitlements, and the ability to participate in governing processes.

Corporations enjoy national status when it comes to protection by government and the system of law. They benefits from entitlements to financial supports from governments (e.g. for research and development). They are able to participate in law-making processes through lobbying and participating in public debates. In some jurisdictions they participate through support of candidates or parties competing in elections.

So why are some corporations not able to take their obligations seriously?

Interestingly, once their taxation profiles have gone public, companies tend to go in one of two ways. Either, they stick with the legality argument and, curiously, some have invited the government to improve its regulation. Or they have gone contrite, perhaps aware of the reputational damage that uncitizenly behaviour can attract. One example was the rather hapless attempt by one company to pay a gift to the UK government in lieu of taxation for which it deemed itself not liable.

So how would corporate citizenship help? My point is simply that if corporations thought about themselves as citizens, in which they share in ruling and being ruled over issues of taxation and expenditure, then they would be more likely to avoid the more gratuitous forms of free-riding.

It is axiomatic in citizenship that citizens are part of a system of governing, rather than simply being subjects (which encourages evasive rather than loyal and supportive behaviour). Equally, citizens are within the ‘social gaze’ which yields relatively soft mutual regulation around shared values and the punitive effects of ‘being found out’, as well as being subject to the harder stuff of coercive regulation.

Examples involving corporations include:

•IT companies offering technological solutions to the some aspects of the sexual exploitation of children,

•retailers warning ‘lads mags’ publishers about their magazine covers,

•sportswear companies boycotting athletes taking illegal drugs,

•major advertisers boycotting the erstwhile News of the World

•alcohol producers providing warnings about safe consumption.

In these cases there was no regulatory direction, but the companies responded to or anticipated concerns about their behaviours as expressed by civil society organisations or governments.

Yes, there are big issues around globalisation and whether corporations are suitable for the very human role of citizen.

These and other issues are explored in Dirk Matten and Jeremy Moon (Eds forthcoming) Corporate Citizenship (Edward Elgar) whose Introduction is available on SSRN and the ICCSR website

By Professor Jeremy Moon, Director of the ICCSR, Nottingham University Business School .

Image by Chris Beckett, reproduced under creative commons license CC BY-NC-ND 2.0. source:

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