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The “pay your taxes” debate
Lagos, Gustavo Lima, Marcos
Lagos, Gustavo
Lima, Marcos
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riesco.pdf
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Abstract
"Over the past two decades, an increasing number of transnational corporations (TNCs) have adopted a variety of policies and practices associated with corporate citizenship or corporate social responsibility (CSR). CSR is often defined as greater responsiveness on the part of TNCs and other companies to the social, environmental and human rights concerns of multiple stakeholders in both host and home countries, and as going beyond the minimum standards set out in law. The CSR agenda has evolved considerably in terms of both the number of companies, civil society organizations, governments and international agencies supporting it, and the range of issues addressed. An earlier focus on selected environmental issues, working conditions, community relations and philanthropy has broadened to include such aspects as labour and other human rights, the social responsibilities of suppliers, and the role of TNCs in dealing with specific societal problems such as violent conflict and HIV/AIDS. An issue that has received less attention is that of corporate taxation. This omission is curious not only because of the key role of taxation in social development, but also because of the fact that responsibilities associated with taxation have always been a central element of citizenship and should, presumably, apply as well to corporate citizenship. The lack of attention to the question of taxation has played into the hands of critics of TNCs who dismiss CSR as window-dressing and point to the double standards that exist when companies promote CSR initiatives and simultaneously engage in legal forms of tax avoidance or illegal tax evasion to minimize their fiscal contributions, as well as other practices that can have perverse developmental impacts. Growing awareness of these problems, and evidence that they are increasing in the context of globalization and economic liberalization, has prompted some civil society organizations, governments and intergovernmental organizations to take action to curb such practices. Internationally, we see, for example, the formation of the Tax Justice Network and the Publish What You Pay Campaign, the efforts of the Organisation for Economic Co-operation and Development to combat tax havens, and certain developing country governments imposing or proposing increased royalties on mining companies. As part of a series of studies on the uptake and impact of CSR in developing countries, the United Nations Research Institute for Social Development (UNRISD) requested Manuel Riesco of the Centro de Estudios Nacionales de Desarrollo Alternativo (CENDA) to prepare a paper that would examine the fiscal performance of foreign mining companies in Chile, the extent and dynamics of tax avoidance, the issue of double standards, the role of government policies in shaping fiscal behaviour, and the nature of policy reforms that might enhance the developmental contribution of TNCs. The Riesco study, presented in part I, attempts to understand why it is that a flourishing private mining sector pays so few taxes in Chile, and why the reported pre-tax profits of a large, modern, foreign-owned copper mine are on a par with those of what Riesco describes as “the ageing and ailing state-owned corporation, CODELCO”. To explain these situations, Riesco identifies an overly permissive neoliberal policy and legal environment; intracorporate financial flows that allow mining affiliates not only to repay loans to related off-shore financial affiliates at generous rates but also to benefit fiscally by being indebted; the sale of copper and by-products at reduced prices to companies that are part of the same corporate structure; and the over-charging of shipping, and treatment and refining charges, by these or other related companies."(pg iv)
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2005-10
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With permission of the license/copyright holder