Introduction
Background and Context of Study
Methodology
Research Approach and Research Protocol
Participant briefing “We are currently engaged in a high-level study on the subject of the UK tax system—and in particular with reference to corporation taxes. We are speaking to a number of key influencers and stakeholders in the UK across major companies, business-representative organizations, NGOs, consumer groups, and other influential bodies with involvement in economic and financial affairs. We are very keen to include your opinions in the study” If a participant agreed to take part, informed consent as well as further information regarding timing, confidentiality, etc., were given |
In the research process, stakeholders were initially invited to voice their unsolicited views on corporate tax. Following this, their views of key questions such as the following were also explored
General opinions about corporate tax approaches
“Based on your opinion and/or experience, to what extent do you agree or disagree that large businesses (FTSE 100 and 250) currently pay an appropriate amount of tax?”; “In your opinion and/or experience, what are the key drivers for large businesses (such as FTSE 100 and 250) to explore beneficial tax strategies, if any?”; “What would you like large businesses to START doing with regard to paying tax?”; “What (if anything) should large businesses STOP doing with regard to paying tax?”
Differentiation between different businesses/industries
“What, if any, industries or types of businesses do you consider may be eligible for special treatment around paying tax?”; “In your opinion, how (if at all) should the rules of paying tax be different for large companies registered outside the UK from the rules for large companies registered within the UK?”; “And what rules of tax payment should be similar/the same for these two different types of large companies?”
General views of large businesses
“Aside from corporate tax, what would you say are key general concerns of the UK public around large businesses (FTSE 100 and 250)?”; “In your opinion and/or experience, how trusting do you feel the general public in the UK is of what happens around corporate income tax with large businesses (FTSE 100 and 250)?”; “What would you say are key concerns of the UK public around corporate tax and large businesses (FTSE 100 and 250), if any?”
Expectations with regard to corporate tax approaches in a stakeholder society
“When considering how to engage in developing a tax strategy and policy, which stakeholders should organizations operating in the UK consider?”; “How can companies ensure that their policies and practices, with regards to paying tax, reflect the objectives and/or the vision and values of their own organization?”; “How can companies ensure that their policies and practices, with regards to paying tax, reflect the expectations of stakeholders?”; “How could companies balance any competing or conflicting demands between their own objectives and values and those of stakeholders?”; “What actions could companies take to ensure that they meet the expectations of multiple stakeholders?”; “Which individuals, groups or departments within the firm should be responsible for determining the appropriate amount of corporation tax to pay?” |
Sampling
Groupings in this article | Stakeholder groups | Focus of organization | Number of employees in UK | Role of interviewee |
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Representatives from community groups (N = 32) | NGOs and think tanks (N = 27) | Economics N = 13; Equality N = 5; Poverty N = 8; Other N = 1 | 1–9 employees N = 12; 10–49 employees N = 8; 50–99 employees N = 1; 100–499 employees N = 3; 500 or more employees N = 3; | Director N = 15; Head of Campaigning N = 4; Other N = 8; |
Special interest groups (N = 5) | Consumer rights N = 5; | 1–49 employees N = 2; 50–499 employees N = 1; 500 or more employees N = 2 | Director N = 1; Head of Campaigning N = 2; Other N = 2 | |
Representatives from business groups (N = 29) | Business leaders (N = 14) | Primary (manufacturing, heavy industries, etc.) N = 4; Secondary (transportation, retail, wholesale distribution) N = 4; Tertiary (business and financial services) N = 6 | Up to 249 employees N = 1; 250–499 employees N = 1; 500–999 employees N = 2; 1000–4999 N = 2; 5000 or more N = 6; Prefer not to say N = 2 | Chief Financial Officer N = 2; Chief Executive Officer N = 1; Head of Tax N = 9; Head of Global Compliance N = 1; Company Secretary N = 1 |
Industry representatives (N = 15) | This category includes chambers, conduct authorities and chartered institutions Background in taxation N = 7; No background in taxation N = 8 | 10–49 employees N = 6; 50–99 employees N = 4; 100–499 employees N = 3; 500 or more employees N = 2 | Director of Industry Groups N = 10; Other (such as Senior Executive of Industry Group) N = 5 |
Data Analysis
Results
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Theme 1: Contribution in relation to salient factors (e.g., size and location of the firm).
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Theme 2: Impact on society and balance of needs of multiple stakeholders.
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Theme 3: Equality on power issues (e.g., behavior toward vulnerable groups).
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Theme 4: Listening behavior (to views outside the company).
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Theme 5: Inclusion and engagement (i.e., in the tax debate, in setting the rules and expectations).
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Theme 6: Transparency (of behavior).
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Theme 7: Beliefs about the (lack of a) non-financial purpose of firms.
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Theme 8: Beliefs about the integrity/character of firms.
What activities in relation to corporate tax are being assessed by community groups? | How business and stakeholders interact in the view of community groups | Why community groups see firms behaving as they do | ||||||
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Common themes | Contribution in relation to salient factors (e.g., size and location of firm) | Impact on society and balance of the needs of multiple stakeholders | Equality on power issues (i.e., behavior toward vulnerable groups) | Listening behavior | Inclusion and engagement (i.e., in the tax debate, in setting the rules and expectations) | Transparency | Beliefs about the (lack of a) non-financial purpose of firms | Beliefs about integrity/character of firms |
How themes are expressed by community groups | At the moment, tax payments are seen to bear little relation to size/capacity or location of business. Companies should contribute in relation to size and capacity, and to where they operate | Business pushes its needs (and shareholder needs) above those of other stakeholders, community groups see their needs neglected and societal concerns ignored, and see companies choosing which laws to obey Everyone’s needs should be considered and balanced as of similar importance, because business only flourishes within society and benefits from society | Comparisons are being made between vulnerable and powerful groups, with a focus on who is unfairly disadvantaged (i.e., vulnerable groups) Special treatment seems unfairly given to large and powerful players. Businesses should meet the standards of the most vulnerable groups and not use their power to gain unfair advantage Vulnerable individuals, charities, and organizations with a social purpose should get special treatment | Business generally doesn’t seem to listen to stakeholder opinions; business informs stakeholders, but on issues that are business centric and of importance to business rather than stakeholders Companies should increase listening (with the aim of increasing understanding) Listening to appropriate issues would be the basis for better informing. | Public bodies feel excluded from the tax debate and experience that as being unfair Debate should start externally (include all stakeholders). Conflicts should be acknowledged and embraced | Community groups perceive business to be operating behind closed doors. Business should openly disclose and share information with society stakeholders; transparency needs to increase and more information needs to be disclosed, with verification by third parties. | Community groups perceive lack of a non-financial purpose in many businesses, no altruistic or pro-social motivation, and no business activity without business benefit Desire for a non-financial purpose that acknowledges that business operates within society (i.e., a social purpose of business). | Community groups detect a lack of integrity (greenwash), and see conduct and communication of business matters carried out in an instrumental manner. Business character seen as elitist, sometimes patronizing, and possibly motivated by a dubious agenda Business should operate with more integrity, and do it for the right reasons (beyond self-interest). |
What activities in relation to corporate tax are being assessed by business groups? | How business and stakeholders interact in the view of business groups | Why business groups see companies behaving as they do | ||||||
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Common themes | Contribution in relation to salient factors (e.g., size and location of firm) | Impact on society and balance of needs of multiple stakeholders | Equality on power issues (i.e., behavior toward vulnerable groups) | Listening behavior | Inclusion and engagement (i.e., in the tax debate, in setting the rules and expectations) | Transparency | Beliefs about the (lack of a) non-financial purpose of firms | Beliefs about integrity/character of firms |
How themes are expressed by business groups | Overall, the tax system seems fair and progressive in comparison to international norms General view is that companies pay according to the law. However, in situations of complexity and lack of clarity, players will try to maximize own benefit. Tax payments should be viewed relative to other comparable companies (not relative to outside of norm group). There should be more legal clarity—companies find it difficult to be held to account if rules are complex or allow for ambiguity | Bias toward internal stakeholders, shareholders, and authorities, and exclusion of other people’s views being seen as fair (business acting on behalf of owners, i.e., people with most legitimate claims) Shareholder focus and agency should remain as dominant, but there is an acknowledgement that business success is increasingly driven through stakeholder support | Comparisons are being made within business groups, and in an international context, with a focus on who is unfairly advantaged (i.e., countries with low tax rates), then arguments are made toward minimum standard Equality should be defined in an international context and tax rates should be set so that British business stays competitive Powerless players are perceived to be SMEs and businesses competing internationally, hence they deserve more support and/or special treatment | Business communicates on a number of issues but could improve the way it informs stakeholders; there is a gap between understanding and available information Companies should increase communication on what companies are doing, on the law (to increase wider understanding), and on finding better ways of providing information to stakeholders on issues that will increase their understanding | Business groups justifies the exclusion of community groups from the debate on the grounds that they don’t understand tax rules and need to be educated Exclusion is seen as fair Debate should start internally (include internal stakeholders), then shareholders and government; business should not have to engage in conflict | Business tries to disclose, but believe that many issues are too complex for community groups to understand. However, there is acknowledgement that existing communication could be improved Not necessarily more transparency required, just better access and better communication of current information desired (i.e., better explanation of tax payments and why companies engage in the strategies they do) | Business groups acknowledges self-interest of business but focuses on the role of business as agents to benefit others (i.e., sometimes indirectly) Business is seen as a character that is first and foremost expected to operate within a legal framework. However, business respondents tend to acknowledge that a strict differentiation of “legal” requirements from expected norms and societal standards is artificial and will not lead to stakeholder support | Experience of business integrity because business do what they say (i.e., look after the business) Expectation that society should appreciate business contribution more (i.e., job creation, pressure of competition) |
Theme 1: Contribution in Relation to Salient Factors (e.g., Size and Location of the Firm)
The COMG View
Expectations of the COMG indicate that companies should contribute in relation to their size/capacity and where they operate.Purely looking at what the law demands, I would say it’s [the tax system is] probably more unfair to small- and medium-sized businesses than it is for multinationals. [N/TT]
If they had a sense of responsibility then they wouldn’t be employing these accountants to find the best ways to avoid paying tax. They should take more social responsibility around contributing appropriately in the countries where they make their money through the tax system. [SIG]
Interestingly, a majority of respondents in the COMG acknowledge international pressure on business, but still would desire more national/local contribution.Where should you pay tax? Where you make the money and have a lot of your business or a lot of branches—where the profit is coming from, even if your head office is registered somewhere else, you should be making contributions in the country the profit is coming from. [SIG]
It’s difficult because one could argue that corporation tax is quite low and companies could afford to pay more—particularly big ones. The argument against that is that they would become international companies and move their business overseas. It’s where you strike that balance—I’m not sure if that balance has been properly struck at the moment. I suspect it’s not. [N/TT]
The BUSG View
Business and industry leaders perceive that businesses are contributing as much as they should be doing, and indicate that in their view, the COMG tends to perceive businesses not contributing enough because they often do not understand how companies, through tax and otherwise, contribute to society.I don’t think the UK system is bad and UK companies, as a whole, pay their fair share of the burden. [IR]
I think people don’t understand about them [businesses] and what they contribute to society, in terms of jobs or the general economy as a whole. People don’t understand what happens to the company’s profit at the end of the year and where they go. [BL]
The BG thinks that a general climate of negativity is based on a lack of understanding and bad press coverage, while the COMG view is that companies have yet to engage in the tax debate in a meaningful way, need to listen more closely to stakeholder views and adopt more transparent communication about tax, as explored in the following themes.We have this particular zeitgeist at the moment where large businesses, or people, that make money are de facto bad and people don’t really understand the benefits that they, as individuals, and we, as an economy, get by having such successful large businesses. [BL]
Theme 2: Impact on Society and Balance of the Needs of Multiple Stakeholders
The COMG View
Expectations of the COMG suggest that everyone’s needs should be considered and balanced with similar importance, because business only flourishes within society and therefore benefits from society.employment practices, social impact, meeting consumer needs. I think concerns around these areas are well founded. [SIG]
The public don’t understand the rules around Corporate Tax, but what they do understand is when the business is doing its bit for the country and for its community. [N/TT]
There is a sense that large businesses, regardless of tax, have a strong economic power within a local community, but do not necessarily contribute to the community in other ways. I think this is very true, particularly in communities dominated by those on a low income. [N/TT]
The BUSG View
Unlike the COMG, the BUSG does not perceive specific stakeholders to be disadvantaged. However, respondents did acknowledge that business success is increasingly driven through stakeholder support.If a sizeable organization has a large body of shareholders, whether private or public, you’d look at it from their perspective… because as they are one of the owners of the business, one of the objectives is to maximize returns to the owners of that business. [BL]
The BUSG does acknowledge a growing importance of COMG as stakeholders, as well as a current lack of engagement and communication with these external stakeholders. In the BUSG view, companies should demonstrate to others (outside the company) that they are paying a fair share of tax.You are always looking to maximize shareholder value. Your first responsibility is to the company shareholders and stakeholders. You are going to look to manage your tax affairs in an efficient and effective way to minimize your tax burden… At the same time, if you are behaving like that, most companies don’t want to have a reputation for being too aggressive in that area. When you look at the external side, it is bad for the company. [BL]
When asked how companies can ensure that their tax policies and practices reflect societal expectations, the BUSG suggested engagement and communication with shareholders, clear articulation and alignment of the tax strategy with organizational values, as well as freely available, well-articulated reports on the tax policy and approach for the wider stakeholder community.What they could do is, they could emphasize that their role in the system is to earn profits for the shareholders, which increases economic growth for society as a whole. [IR]
Theme 3: Equality on Power Issues (e.g., Behavior Toward Vulnerable Groups)
The COMG View
[Businesses have the power to] artificially shift their profits in order to make their profits where the tax is lowest, lobbying for government policies and changes to reduce their tax bill relative to what low income individuals have to pay, and funding media organizations to not talk about this and to talk about things like benefit cheaters to divert the issue from what is really important. [N/TT]
Contrary to these experiences, the COMG expectations go in the opposite direction. To enable a more equal system, powerful stakeholders should comply with the same rules that the least powerful are expected to comply with. That is, businesses should meet the standards of the most vulnerable groups and not use their power to gain an unfair advantage. In fact, COMG perceptions of fairness indicate that the more powerful a stakeholder is, the more they should contribute.[Businesses] exploit the rules to the maximum, use transactions or legal structures that are probably bordering grey areas, disadvantage others, and are within the law but not in the spirit of the law. [SIG]
The BUSG View
“The more virtual companies that are international and able to use brand fees across borders to get their profits into low tax jurisdictions.” [BL]
Generally, in the experience of the BUSG, the UK tax system is seen as quite fair because it appears transparent, fairly progressive, and fit for purpose. But in the international arena, players are perceived to try to maximize their own benefit in situations of complexity and lacking in clarity, for example:I don’t think there’s an understanding of how complex the UK tax system is… there’s an unfairness in the way in which internationally mobile businesses are able to do some of the things they do compared to other businesses. [IR]
There needs to be more international work rather than, necessarily, work on domestic policies. [BL]
Theme 4: Listening Behavior
The COMG View
[Companies] have to stay within the law, obviously, but I’d like them to do more than the minimum requirement. They should be listening to what the public feels and then responding. [N/TT]
By listening to stakeholders and consulting them before policies and practices are set, then making sure once they are set that this is what they meant. Then going back a year later to check that they’re still doing the right job. [N/TT]
The BUSG View
However, some members of the BUSG acknowledge that listening to stakeholders in areas that are less clearly laid out by legislation could be useful:I think there’s a lack of understanding of the role the companies play and therefore, when they see the headline profit and tax numbers it can lead to problems, particularly if the tax is quite low. But I think it’s a complicated subject and very easy to get the wrong end of the stick. [BUSG]
The media is often blamed for misinforming the COMG:So government set the rules and design the policy framework, so you engage with them so that the policy framework is fit for purpose, then you have a different set of issues that is, what is your attitude to tax risk operating within that policy framework. If there is any grey how do you choose where to be in the grey, and that piece is the engagement you would have with your other stakeholders. [BUSG]
While more and better listening is mainly desired by COMG respondents, stakeholders across all groups note that better communication would be a prerequisite for genuine engagement (which is discussed below).I think that the public quite understandably believe what they read. There is a lot of misinformation from the media and so-called tax campaigners that leads them to think that there’s more dodgy practices going on than there actually are. [IR]
Theme 5: Inclusion and Engagement (i.e., in the Tax Debate, in Setting the Rules and Expectations)
The COMG View
Engagement and transparency—they are the two biggest. [N/TT]
I think they need to build trust and include real people… The ‘stakeholder’ has to be more than a word. There has to be a series of relationships behind it that mean people feel they are stakeholders. [N/TT]
By consulting with the stakeholders—members of public, employees and other bodies. Be open and transparent about what the strategy is. [SIG]
The BUSG View
A comment from a BUSG representative also suggests that engagement with various stakeholder groups can help toward designing a joint narrative.Yes, you have duties to your stakeholders that you should manage your taxes effectively, but not to the minimum level because that’s too aggressive. Engagement—that sounds like a good idea to do—maybe companies should be more proactive in it. [BL]
In terms of guiding approaches that companies could adopt in respect of tax, the top choice among the BUSG is for them to engage with industry bodies and politicians to develop new tax legislation. In contrast, consumer groups would prefer companies to engage proactively with the general public in the UK to deliver on societal expectations regarding company tax, and NGOs/think tanks favor companies making an effort to operate within spirit and letter of the law as their top choice. The majority of respondents in this survey agree that businesses should work further on creating a greater degree of transparency and improving clarity in communication about what tax they are paying and their profits.You have to engage all stakeholders. You have to start with large companies, get some SMEs, get some large companies and then perhaps, between all of them they could produce some sensible report; that would be helpful. Then it tells the story from the small company through to the large company. [IR]
Theme 6: Transparency
The COMG View
There should be more transparency about what is paid; that would be helpful. I think it is about making information publicly available; [businesses] rely on the media to explain those things that people don’t understand. [N/TT]
There could be league tables detailing the proportion that companies paid in tax and their levels of compliance. [SIG]
Interestingly, the COMG perceives transparency on any business matters as a foundation for trusting relationships with stakeholders.Transparency would be a great help, along with greater representation [of the public body] on boards and greater accountability. [SIG]
A company that can be open and transparent and quite bold about what it does will probably get the benefit of the doubt around its tax affairs as well. I don’t think a company can advertise its tax rules and expect the public to engage with it and understand what’s going on, but they can be trustworthy overall. [N/TT]
The BUSG View
The advent of country-by-country reporting, which would provide more transparency. For example, the PwC Building Trust Awards for companies, getting accolades that they are transparent with tax payment. [IR]
Offer some education, because my view is that the public perception is based on what they read in the newspapers, which is probably an inaccurate portrayal of the facts. So by explaining how the tax is calculated, what reliefs you get, and why those reliefs have been put in place by governments. [BL]
Theme 7: Beliefs about the (Lack of a) Non-financial Purpose of Companies
The COMG View
I think companies are now financial entities above everything else. Once that would not have been the case; 25 years ago that was not the case. Now the need to maximize shareholder value is the dominant ethos and taking every tax advantage you can is part of that. [N/TT]
It’s disappointing, because their [business] aim is to maximize profits and I suppose they go to fancy accountants who will work out the best way for them to avoid paying as much tax as possible—is there no other purpose to business? [SIG]
The BUSG View
However, while showing an understanding of COMG concerns, expectations of businesses reveal that they do not feel obliged to go beyond legal requirements—that is, a business is seen as a character that is expected to operate within a legal framework, and not to do more than that. The beliefs behind these expectations indicate that although concerns are understood, they are perceived to not necessarily be well founded.That large businesses are only driven by profit, don’t pay enough attention to non-financial aspects to the good of society, and also I think the big thing in some businesses at the moment is employment conditions, zero-hours contracts and all that kind of stuff. [BL]
In general these concerns are not well founded; they are understandable. It’s always easy to blame the other. They forget that businesses are run by people who’ve got similar aspirations to themselves, but at the same time there is a division between the people who run businesses and people who staff them. [BUSG]
Theme 8: Beliefs about the Integrity/Character of Firms
The COMG View
I think there is an issue around trust and whether companies are acting with integrity. [N/TT]
Through extensive use of accountants and legal professionals, there can be ways found to stay within the law, but go far beyond what was ever intended for the law and what people expect the law to be used for. Staying within the law itself is not necessarily the best benchmark of whether a company’s tax practices fit with what policy makers intended or what the public expects. [N/TT]
…if you are a responsible citizen, whether you are an individual or a corporate, then you do have a moral obligation to get things right. I don’t think it’s enough to just comply with the law because on occasions, the law is nonsense and a lot of people know that. [SIG]
The BUSG View
Within the BUSG, experiences revealed the general belief that companies pay according to the law—and as such, demonstrate integrity. However, in situations of complexity and lack of clarity, players will try to maximize their own benefit. This was the view in particular regard to multi-nationals, for example:The public debate on this is not as sophisticated as it needs to be before companies can regulate their behavior with that. [BL]
However, the BUSG does not see this as a sign of bad character, but rather as a business decision.Any multinationals, particularly those operating with a significant presence in the US, may be still able to exploit the rules. [BUSG]
Obviously there’s a whole load of people who perceive it to be unfair around multinational taxation, but I don’t think I agree with them. Everybody thinks that the tax system is unfair relative to how it applies to them. That’s the point. It’s always fair for other people to pay tax. [BL]
Discussion
Theoretical Contributions
Themes from research in this study | Managerial implications | Policy implications |
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What companies need to do (contribution in relation to salient factors; balance in relation to multiple stakeholder and societal needs; equality on power issues) |
Assess tax payments in relation to local/regional/national societal standards, and in relation to the economic situation of a community as well as in relation to how vulnerable groups are seen to be treated
Perhaps most importantly, managers need to understand that community stakeholders intuitively make sense of corporate tax payment relative to the size and location of business and will judge business accordingly. Business is perceived as powerful and community groups desire tangible contributions by business and support for less powerful stakeholders
Engage in collaborative mechanisms and work with others to create kite marks and industry-wide standards for responsible tax approaches
Following Griffin and Prakash (2014), managers may want to think about corporate tax in terms of collaborative mechanisms, such as how firms can partner with governments, non-governmental organizations, and other players to achieve specific tax-related objectives. As Griffin and Prakash outline (p. 473), such objectives can range from strengthening local communities to furthering wider economic development. Managers may want to think about how they can utilize the subject of corporate tax to support voluntary programs and to work with community groups and policy makers to create kite mark and tax-related standards that are widely supported and understood |
Through multi-stakeholder engagement create behavioral standards that take account of national and international norms and that consider the interests of business and communities
Differences in stakeholder views relate to business groups focused on the international landscape and comparison with peers, while community groups focus on the national landscape and comparison between individuals and companies as well as vulnerable/powerless versus powerful groups. There is an opportunity for views to be understood and integrated through a multi-stakeholder dialogue that policy makers can lead on. Both business groups and community groups are keen to engage with policy makers due to the power that policy makers have—and would thus be keen to be invited to discuss options with government. As such, findings in this study suggest that policy makers should compare corporate tax practices to those applied to individuals and other types of businesses, as well as to international standards and norms. There is room to create standards across national and international boundaries that do not appear to disadvantage any business or community stakeholder
Introduce options for contributions in kind
Policy makers may also want to consider widening the “what?” of corporate tax approaches by introducing pro-societal initiatives that firms can invest in (as part of their corporate tax duties), such as providing corporate expertise and facilities to charitable organizations or through the development of skills and education in local communities |
How companies need to do it (Listening; inclusion and engagement; transparency) |
Listen to community groups and actively report on the results of listening
Findings in this study encourage managers to actively listen to community groups and to be inclusive and engaging in the corporate tax debate. Following Griffin and Prakash (2014), managers may want to think about listening to and including stakeholder views in line with functional initiatives (such as to enhance the employee voice in the corporate tax debate and be consumer oriented when deciding on tax policies). Importantly, managers could measure how such activities impact on business outcomes such as employee engagement and customer retention. Managers may also want to engage in dialogue about cross-functional/corporate initiatives in relation to corporate tax (such as improving corporate governance in the area of tax for the purpose of transparency and inclusion)
Communicate in more simple language with more transparency
Importantly, better communication and more transparency in reporting can be achieved by: (1) publishing business results in relation to tax in an accessible manner on company websites, voluntarily, globally (information about tax paid in different markets), and appropriately framed for different levels of financial knowledge among audiences; (2) using analogies and metaphors (the story approach) to make sure that the audience understands the full picture rather than just publishing spreadsheets and numbers; (3) translating percentages and abstract numbers into pound figures and tangible examples; (4) including tax information in corporate responsibility reports; (5) independently verify reports, for example by auditing firms |
Define own role not only as law-maker, but as facilitator of communication
Findings in this study suggest that policy makers should encourage business to consider community views more explicitly: differences in views relate to business groups focused on shareholders and governments, while community groups focus on wider stakeholders. While both groups agree that there needs to be increased understanding, business thinks understanding can be achieved through informing stakeholders on issues that business deems important, while community groups believe understanding can be achieved by business first listening to the concerns and important issues that stakeholders have before responding. There is room for policy makers to work toward integrating both views by a process of listening and informing (and particularly encouraging companies to listen and inform), and providing opportunities for genuine engagement with the views of all players
Require companies to report on stakeholder expectations with regard to tax
Policy makers may want to think about the requirements for companies to include stakeholder perceptions of company practices in reporting, and report on tax practices in simple formats such as “frequently asked questions.” They may also suggest that companies may want to report on tax practices using a framework that includes aspects of a “why?” “what?” “how?” approach. In the future, policy makers could consider asking companies to have stakeholder representation on boards and be involved in discussions of corporate tax policies
Require companies to report on tax practices in easy-to-understand formats and support companies to make payment information more tangible
Importantly, policy makers could also summarize corporate tax payments across firms in a format that people understand, e.g., “the amount of tax paid by this industry equates to the restoration of x miles of potholes in public roads”; “the amount of tax paid by FTSE 100 companies this year equates to y number of individual tax payers”; or “the amount of tax paid by small and medium-sized businesses this year equates to the amount of tax collected by a country such as z” |
Why companies need to do it (Non-financial purposes; motivation; integrity and character) |
Answer the question “why do we exist” from a multi-stakeholder perspective
Findings in this study encourage managers to consider the wider purpose of business and demonstrate non-financial purposes and integrity in how they act on the issue of corporate tax. This requires a change of mind-set as, currently, corporate tax is often seen to be practiced “behind closed doors” and not linked to a wider purpose. Managers need to be aware that firm activities are being judged in conjunction with perceived motivation. Hence a firm that pays very little tax may be perceived as cheating society of important resources regardless of what the actual intention may be
Voluntarily include community groups (and other stakeholders) to discuss role of business in society/communities and consider joint sign-off on tax policy
Following Griffin and Prakash (2014, p. 471/472), managers may want to think about cross-functional/corporate initiatives in framing their purpose jointly with multiple stakeholder representation. Firms can demonstrate integrity and character by voluntarily fostering governance initiatives that could require tax policy to be developed and signed off by representatives of multiple purpose |
Require companies to prepare a statement “why we exist” that explicitly acknowledges the trade-offs made between stakeholders in developing tax policy
Findings in this study suggest that policy makers may want to request businesses to consider their role in society explicitly and to act as citizens with non-financial purposes (alongside financial targets) and integrity. This may include a requirement to report on non-financial targets
Invite business to work with community groups on issues of purpose and motivation, e.g., through diverse stakeholder representation on boards
One way of achieving a more balanced role of business in society and to co-create appealing purpose for business could be to request societal representation on business boards, including employee representation, customer representation, community representation. |