Take a Dollar, Leave a Penny: Tax Evasion and “Corporate Social Responsibility”

Isn’t it nice how much corporations seem to care these days? The charity walk-a-thons, the grade school volunteer activities, the “community partnerships”, it seems as though a corner has been turned and corporations have finally developed a holistic conception of society which sees them as an active and responsible member. Corporate Social Responsibility (CSR) is a concept whose popularity has grown exponentially in recent years, in which companies have purportedly embraced a new vision which calls for their involvement in providing services to the communities in which they operate. These services are provided ostensibly for altruistic reasons, and are often completely outside the normal competencies of the organization as a business. CSR has become an integral part of their overall strategy of many major corporations and its popularity in the business world continues to grow year over year. In many ways, it’s the new craze in business.

On the surface, this would appear to be a positive development. Having corporations going out of their way to ease the burdens of citizens and to promote positive social causes would seem to take some of the harsh edge off of capitalism, and in the process nudge these organizations away from their legally prescribed singular goal of maximizing profits for their shareholders. While there are undoubtedly many decent people in the corporate world, including many of those residing in the C-Suites of major companies, why would they steer their organizations away from the goals for which they have been solely created? In what context are corporations deciding to double as social caretakers despite the intense pressure they are under from their owners to fulfil their goal of maximizing profits?

The answer can be found in the transactional relationship between major corporations and society at large; a transactional relationship where the terms greatly favour corporations to the detriment of their societal stakeholders. In the fiscal year 2010, the largest financial institutions in America paid an income tax rate of only 11%; a rate which is below the legally mandated 35% and is itself vastly overstated due to financial manipulation and the utilization of tax shelters. A recent report showed that 30 of the most profitable companies in the United States have paid no taxes or even negative taxes (in the form of transfer payments from the government) over the past three years. The companies on this list include some of the most prominent in the world, such as General Electric, Dupont and Honeywell. Through the use of offshore tax havens, the manipulation of tax loopholes, and through active lobbying of the government to create additional legal protections to insulate them from paying taxes these companies and others have managed to effectively extricate themselves from the social contract. While they continue to reap huge benefits from public resources and patronage, they do not contribute their share to the continued maintenance of society as they legally are required to, and as all of its productive citizens do.

It is against this background which Corporate Social Responsibility has risen to prominence in recent years. With one hand companies are detracting from the public good on a huge scale by creatively avoiding their obligation to pay taxes; while with the other they are theoretically giving back to the public good through their CSR activities. However what they are “giving back” is a pittance and perversely still serves their primary goal of increasing profits as a result of the self-promotion these activities naturally provide them. Public relations campaigns masked behind a thin yet highly visible veneer of “responsibility” is what corporations have given in return for what they continue to take through their negligence towards the society which makes their very success possible.

While corporations may sponsor barbeques, tree planting days and softball games to show their commitment to causes of social import, they are helping to destroy the very institutions upon which the citizenry relies for its well-being. The result of billions of dollars of taxes unpaid has been the methodical and inevitable destruction of social infrastructure. Cuts to education, health care and entitlement programs have been the natural result of a new economic order where those entities whose income is highest still find ways to pay the least taxes to the societies to which they owe their very success.

Given the rise of Corporate Social Responsibility in tandem with the accelerating decline of government as a competent provider for the body politic, it would be plausible for one to argue that in many ways corporations are gradually positioning themselves as a future alternative to government. Imagine if you would, a corporate government; it would be one in which the people have no say and where the ultimate goal is one which is indifferent at best to the condition of those who would come to rely on it. This is no longer a fantasy vision of a dystopian, necessarily fascist future; this is observably happening and the vision of it is what is inspiring individuals to take to the streets in the protest of that amorphous entity which is “Wall Street”. My advice to those at Occupy Wall Street and those at Occupy protests across the world; distil your message to one main point and make it this: corporations must stop obfuscating by pretending to be our friends and must pay their obligated share of taxes. Ending the legalized criminality of tax loopholes and offshore tax shelters, simply enforcing the social contract, would fill public coffers and would allow government to do its job of building and supporting the social infrastructure upon which we all rely.

Every organization should have an ethical code which governs its actions in order to reduce negative externalities to society, but the rise of Corporate Social Responsibility in the form of proactive public engagement is a significant and potentially dangerous development in the long term. The government is ours as citizens, corporations are the sole possession of their shareholders, and we allow the latter to starve the former at our own long term detriment. Occupy Wall Street, say it loud and clear that corporations must pay their taxes and you will find that most of what else you want will naturally be satisfied with this demand. Corporate tax evasion masked by the sham of CSR is no replacement for a responsible and accountable government, something which we as citizens should never lose sight of as we evaluate the gap between the words and deeds of business leaders and unscrupulous politicians.

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2 Responses to Take a Dollar, Leave a Penny: Tax Evasion and “Corporate Social Responsibility”

  1. marcerickson says:

    It’s time to end limited liability for corporations.

    When limited liability for corporations was created, governments had reasons. Capital was hard to obtain. There had been many frauds where investors in a corporation lost all of their investment – in most cases they had no clue as to how to attempt recovering their money. Limited liability of corporate investors was government’s attempt to introduce liquidity into the system. Government added rules (AKA laws) to govern the creation and governance of corporations.

    Which worked. At first. For a long time.

    More:
    http://open.salon.com/blog/marc_erickson/2011/10/31/fixing_capitalism

  2. It is actually really a very helpful section of info. I am fulfilled you contributed this beneficial info along with us. Please remain people up-to-date in this way. Thank you spreading.

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