Corporate Tax: What Do Stakeholders Expect?

Abstract

Motivated by the ongoing controversy surrounding corporate tax, this article presents a study that explores stakeholder expectations of corporate tax in the context of UK business. We conduct a qualitative analysis of in-depth interviews with representatives of community groups (NGOs/think tanks and special interest groups), as well as interviews with those representing business groups (business leaders and industry representatives). We then identify eight themes that together describe ''what'' companies need to do, ''how'' they need to do it, and ''why'' they need to do it, if they wish to appeal to a wide group of interested parties. We discuss our findings based on the corporate social responsibility literature and propose novel ways for community groups and business groups to connect on the topic of corporate tax, suggesting opportunities and themes for dialogue and potential steps to co-create solutions in a stakeholder society.

Stakeholder Agency Relationships: CEO Stock Options and Corporate Tax Avoidance

“…In determining the firm’s tax policy the CEO faces competing demands from multiple stakeholders (shareholder and non‐shareholder). Complicating the CEO’s calculus further, there is likely to also be heterogeneity of preferences or demands within each of these stakeholder groups (Doellman et al, 2017; Hillenbrand et al, 2019). Stakeholder agency theory suggests that when faced with competing stakeholder demands, the CEO will focus on an outcome that can be readily cast as balancing shareholder interests (e.g., Hill and Jones, 1992; Mitchell et al, 2016).…”

A Theoretical Review on Corporate Tax Avoidance: Shareholder Approach versus Stakeholder Approach

“…The popularity of corporate tax avoidance practices is fueled by managers who inherently do not regard such measures as erroneous or even iniquitous (Sikka, 2010). They are adamant that companies possess the rights and freedom like any other taxpayers to manage their taxes so long they abide by the letters of laws (Hasseldine & Morris, 2013;Gribnau, 2015;Lanis et al, 2018;Whait et al, 2018;Hillenbrand et al, 2019). It should be borne in mind that companies are essentially created as investment vessels and managers are contractually bound to serve the shareholders' interests.…”

“…However, critics have been quick to reproach corporate tax avoidance practices. Public tax shaming against multinational corporations have seen Apple, Google, and Starbucks becoming the global poster children of corporate tax avoidance through their manipulation of transfer pricing system to "move" their substantial profits to more tax-friendly locales (Barford & Holt, 2013;Hillenbrand et al, 2019). Using J. Fin.…”

“…Under legitimacy theory, corporate values are to be harmonious with those of the society so as to preserve the companies' legitimacy to continue operating as their existence and well-beings are profoundly at the mercy of societal perceptions (Lindblom, 1994;Gray et al, 1996). When stakeholders regard tax avoidance as contradictory to their expectations of proper firm behaviors, the long-term viability and survival of taxavoidant companies are put at risk (Woods, 1991;Jones, 1995;Lanis & Richardson, 2013Hillenbrand et al, 2019). In consequence, companies hardly ever publicize their tax avoidance practices (Sikka, 2010).…”

“…Numerous literatures have scrutinized corporate tax avoidance. In particular, it is being frequently analyzed under the lens of CSR as the boundaries between corporate tax laws and behaviors become further distorted (Sikka, 2010;Lanis & Richardson, 2015;Hillenbrand et al, 2019). The theoretical arguments and inconsistent empirical observations on the relationship between corporate tax avoidance and CSR accentuate an inherent conflict on the issue of fundamental corporate responsibility (Hanlon & Heitzman, 2010;Watson, 2015;Davis et al, 2016); do companies owe their primary duty to the shareholders or stakeholders?…”