The CSR Newsletters are a freely-available resource generated as a dynamic complement to the textbook, Strategic Corporate Social Responsibility: Sustainable Value Creation.

To sign-up to receive the CSR Newsletters regularly during the fall and spring academic semesters, e-mail author David Chandler at david.chandler@ucdenver.edu


Wednesday, February 4, 2015

Strategic CSR - Tax inversion

The issue of corporate tax has arisen lately as companies in the U.S., in particular, try to evade the relatively high headline rates by acquiring or merging with smaller companies in foreign, low-tax economies and re-incorporating their HQ in that economy—a process known as a "tax inversion." In response, the natural thing to do would be for governments to get together to reform the global tax infrastructure. Coming up with a reasonable uniform tax code and universal rate would be in everyone's interests, including the companies who currently dedicate a significant amount of resources to navigate among different regimes. The article in the url below, however, conveys the complexity of such a task, which is being pursued by the OECD:
 
"Launched by the G-20 last year, the overhaul is intended to modernize a web of 3,000 bilateral tax treaties and national tax rules that dates back to the 1920s and allows companies to adopt legal structures designed to shift their profits to the lowest-tax jurisdictions, regardless of where those profits are generated."
 
While inter-governmental agreement might prove challenging, it is merely the first step in a highly convoluted process that must also take place at the national level:
 
"But tax experts warned that agreement between governments on the outlines of new tax rules is a first step that must be followed by changes in domestic legislation in each of the participating countries that could take many years to complete and implement."
 
And, of course, in spite of the inherent common sense of synching the world's tax codes, there are some governments that benefit from the system as currently structured:
 
"Ireland hosts the international operations of a number of U.S. digital giants, and has been among a small number of countries that have faced allegations that their tax codes facilitate questionable tax-planning practices by international firms. But the Irish government has vehemently denied that the country can be characterized as a tax haven."
 
Take care
David
 
David Chandler & Bill Werther
 
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Global Tax Overhaul Gathers Momentum
By Paul Hannon
September 16, 2014
The Wall Street Journal
Late Edition – Final
B1