Corporate Social Responsibility and Tax Planning

Publication Date01 Jun 2015
AuthorHans Gribnau
Corporate Social
Responsibility and Tax
Planning: Not by
Rules Alone
Hans Gribnau
Tilburg University, The Netherlands; Leiden University,
The Netherlands
Taxpayers have to plan their tax affairs to plan their life or develop their business
strategy. Often tax planning is encouraged and intended by tax legislation but sometimes
it is not. By way of tax incentives, the tax legislator often tries to steer citizens’ behaviour
to achieve all kind of policy goals. This way the tax legislator stimulates taxpayers to
adopt a calculating attitude towards the tax system, breeding a rule-based mindset
focused on tax planning. This rule focus crowds out ethics. Taxpayers turn around the
rules to their advantage. The tax legislator usually reacts with refined or new rules that
add to the existing complexity of tax law. Companies endorsing corporate social
responsibility (CSR) accept ethical obligations beyond compliance with the law. It is
argued that these companies should agree that the interpretation and use of tax rules are
based on a moral choice that rules out strictly complying with the letter of the law. CSR
companies should even take one more step in endorsing the view that tax is a body of
rules, which itself is grounded in principles that make up the internal morality of law.
Therefore, they should take these principles seriously when engaging in tax planning.
Corporate social responsibility, internal morality of law, legal ethics, legal principles, tax
incentives, tax legislation, tax planning
Corresponding author:
Hans Gribnau, Tilburg University, Postbox 90153, 5000 LE Tilburg, The Netherlands.
Social & Legal Studies
2015, Vol. 24(2) 225–250
ªThe Author(s) 2015
Reprints and permission:
DOI: 10.1177/0964663915575053
Taxation is key to the character and functioning of the state, economy and society. For
over a century, taxation has underpinned an enormous growth in collective spending.
Tax revenues enable government to provide the public with all kinds of public goods and
services. With taxes, people pay for the legal system. Thus government provides a frame-
work for the functioning of society and economy supported by taxes. Enforcing contracts
supports markets, for instance. The state fosters innovation, encourages investment,
boosts worker productivity and stimulates the efficient use of scarce resources. Further-
more, taxes are collected to pay for public goods such as defence, health care, public edu-
cation, infrastructure for transport and communications and social security. Through a
wide range of activities, the social welfare state tries to create substantive freedom and
equality for its citizens. Often the tax system itself is used to promote the common good,
for example, for income policy goals, to promote economic growth (e.g. by attracting
foreign investors), to increase employment and for environmental policy. Tax incentives
are used to affect behaviour. Thus taxation has an enormous impact on all kinds of activ-
ities and situations of society’s members, citizens as well as enterprises. In order to keep
in control of their finances, people have to know the impact of taxation and tune their
behaviour to this impact. It is thus that they engage in tax planning. In an international
context, tax planning is often used to avoid double taxation.
Tax planning, tax avoidance and tax evasion are different ways in which businesses
respond to tax legislation. In one way or another businesses, like all taxpayers, make use
of tax legislation – whether domestic legislation or international tax rules, such as tax
treaties. In this article, I will first deal with the relationship between two fiscal actors,
legislature and taxpayers, who share a calculating attitude towards taxes. The upshot
of this attitude is that the use of tax law is an essentially rule-based affair shared by the
two of them. In the framework of this article, the Dutch corporate tax system is used as a
case study. Reference is also made to literature concerning other jurisdictions, cautiously
suggesting that some arguments may be generalized. Dutch tax legislation is nowadays a
continuously growing, very complex and often muddled, inconsistent body of rules,
which sometimes violates important legal principles. These principles are important to
comply with because they constitute the ‘internal morality of law’ (Fuller, 1977
[1964]: 200–224). Taxpayers in turn seem to focus on rules, paying little attention to
underlying principles. This rule focus crowds out ethics. Subsequently, I will have a
closer look at the consequences of this rule-based reciprocal use of tax law for the idea
of tax compliance. To my mind, legislature and taxpayers should pay due respect to these
fundamental principles to avoid a deadlock.
Here, I employ the term ‘tax planning’ in a broad way including very different forms
of taxpayer behaviour encompassing a broad set of avoidance and evasion schemes that
affect only financial arrangements of taxpayers. In this way, tax planning is contrasted
with strategies in which taxpayers emigrate or companies move physical operations to
avoid higher taxes (Bruce et al., 2007: 226). Tax planning should, for the purposes of
this article, thus, be understood in a neutral ethical way, as opposed to, for example, tax
evasion and tax avoidance, which often have a negative – unethical – overtone. The con-
ventional distinction between tax evasion and tax avoidance seems to be quite clear,
226 Social & Legal Studies 24(2)

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