Tax and Corporate Social Responsibility
Today, Corporate Social Responsibility (CSR) is much wider concept than just donations and philanthropy. It is viewed as a way of doing business, identified with the strategies and standards of business conduct that companies follow in their business. While focused on creating shareholder value, the companies seem to be equally focused on CSR for various reasons like - attracting socially responsible investors, customer group, marketing, branding, enhanced employee relations and Tax incentives.
Paying taxes is perhaps the most fundamental way in which private and corporate citizens engage with broader society. After all tax revenues are major source of public spending and development of the society. So when CSR is as a way of doing business, do the companies apply CSR principles when managing its tax liabilities as well?
The Vodafone tax case judgment from India’s Supreme Court on 20th Jan was cheered by the corporate world. Lot is being discussed on how this decision will create business and economic advantages for India, how this will boost the investor sentiments towards India and create an investor friendly climate etc etc. This is quoted as an example of “tax planning” aiming at minimizing taxes for maximization of shareholder value.
Now, Let’s take a look at another important but less talked about aspect of such transactions – The Social responsibility of the corporate world or Corporate Social responsibility (CSR).
Let’s try to understand this $12 billion transaction in a nut shell. Hutchison (Hongkong) sells its 67% stake in Indian co. Hutchison Essar to Vodafone (NL). It routes this transaction through its 100% owned subsidiary in Cayman Islands and 12 other subsidiaries incorporated in Mauritius/India. As per the SC verdict, Since the Seller (Hutchison HK) sold its stake in holding company (Cayman entity) to the buyer (Vodafone NL),it was completely a transaction between two foreign entities selling a foreign company ;with no direct Indian
Paying taxes is perhaps the most fundamental way in which private and corporate citizens engage with broader society. After all tax revenues are major source of public spending and development of the society. So when CSR is as a way of doing business, do the companies apply CSR principles when managing its tax liabilities as well?
The Vodafone tax case judgment from India’s Supreme Court on 20th Jan was cheered by the corporate world. Lot is being discussed on how this decision will create business and economic advantages for India, how this will boost the investor sentiments towards India and create an investor friendly climate etc etc. This is quoted as an example of “tax planning” aiming at minimizing taxes for maximization of shareholder value.
Now, Let’s take a look at another important but less talked about aspect of such transactions – The Social responsibility of the corporate world or Corporate Social responsibility (CSR).
Let’s try to understand this $12 billion transaction in a nut shell. Hutchison (Hongkong) sells its 67% stake in Indian co. Hutchison Essar to Vodafone (NL). It routes this transaction through its 100% owned subsidiary in Cayman Islands and 12 other subsidiaries incorporated in Mauritius/India. As per the SC verdict, Since the Seller (Hutchison HK) sold its stake in holding company (Cayman entity) to the buyer (Vodafone NL),it was completely a transaction between two foreign entities selling a foreign company ;with no direct Indian