Question:
Discuss about the Corporate Social Responsibility for Stakeholder Theory.
Business organizations have certain responsibilities towards society. Decisions taken by them and the actions they take affect the society. It is the duty of corporations to realize their social responsibility. As per the stakeholder theory which was proposed by Edward Freeman. Stakeholder theory is about realizing the social responsibility of the business organizations. The theory identifies the people who take stake in a particular organization. These stakeholders of the organization are influenced largely by activities of the business organization (Braithwaite 2017). The stakeholders of any business organization depend upon the type of business the company is doing. The topic that I selected to discuss about business ethics is Tax Evasion. In present scenario, we have come across many cases where business owners or individuals are accused for Tax Evasion. To discuss further about this topic it is very important that we know what tax evasion is. Tax evasion is an illegal activity in which individual, group or an organization does not pay their taxes intentionally. Intentionally not paying the taxes is a federal offense. Both non-payment and underpayment are illegal (Mason and Simmons 2014).
Every organization needs to be legitimate in all their actions. This is one of the most important elements of corporate social responsibility. Failure to perform any services or activity might put the corporations in trouble. One such activity is tax evasion. This practice is very common, as many organizations are often found guilty for not paying their taxes. The stakeholders here are Government or federal authorities, judiciary, employees and customers. All the stakeholders somehow are affected by the act of tax evasion of the companies (Kolk 2016).
Companies avoid tax payment just to secure a convenient tax position. Tax havens provide secrecy for the protection of investors who have a risk of being scrutinized by the external authorities. Corporations move their headquarters that are more tax convenient. Such locations are often offshore and hence called tax havens. According to me paying taxes is the duty of all the citizens. All individuals pay their taxes because the Government for the welfare of the people uses those taxes. It is a legal obligation and therefore failure to comply by the rule might lead to company paying penalty, the reputation of the company would be tarnished and in most cases the company is forced to wound up. It becomes very difficult for any company to start their business again. Once the company is closed the direct impact is felt by the employees because they lose their jobs. The company loses the trust of its customers. Legal battles and too much of time and resources are wasted to fight those legal battles.
It is not that the tax avoiders do not pay tax at all. Usually it happens that tax evaders pay a part of their taxes and tries to secretly evade or avoid paying a part of the task. As per the judiciary of any country or region, citizens are obliged to pay their taxes. There are number of taxes a business organizations has to pay, like the sales tax, corporate tax, income tax and many more. Government officials collect these taxes and use for other development purposes. Any business organization not paying tax clearly means that they are not contributing to the development of the country. I think that taxes are a way of appreciating the contributions of the society. All business organizations get important resources from the people and society. Without these resources and the acceptance of the organization by the society, it would not have been possible to sustain and flourish. Then why not pay taxes like good citizens. Those taxes will be used for development and even the tax payer would be benefited. Another serious issue related to tax evasion is not just the business organizations who are involved often the tax officials help in evading taxes. Different countries have their own laws for penalizing the tax evaders. Once caught there will be media coverage. In present scenario it is not possible to escape from the eyes of the media. It would not take much time for any company to spoil its image once caught in any such case. Competitors will be advantaged by the carelessness or negligence of the tax evading companies. The company will lose the trust of its customers and other stakeholders. Brand image of the company will be destroyed and they might not be able to gain it again (Shafer, Simmons, and Yip 2016).
Ethical branding refers to the branding of goods and services with morality and choosing the most appropriate action. This type of branding occurs when a particular company wants to build reputation or goodwill in the market. According to Park, Lee and Kim (2014) ethical branding improves the reputation of any organization that reinforces the brand. People observe the social, environmental and economical over time and make it the basis for their judgment. Therefore, it can be concluded and what I personally believe that the actions of any organization are the determinants of the reputation of an organization.
People or organization that avoids payment of taxes would have to face prosecution before the court of Commonwealth Director of Public Prosecution. If they are found guilty of an offense security bonds, community service orders, fines and other additional penalties like imprisonment in severe cases of tax evasion might be imposed on the convicts. A criminal conviction often affects the employment career of an individual.
No, I do not think that these legislations are effective enough to combat the issue of tax evasion because these laws have been in existence from many years yet we hear cases of tax evasion. It is clear that the current legislations do not stop the evaders because they have found loopholes in the legislations. In many cases, the tax officials and even legal authorities help the tax evaders. The law fails to intimidate the people from committing the crime. I think the law needs to be stricter. The year of imprisonment can be increased and the license of the tax evader should be cancelled for lifetime. The legislation is required to create fear for the tax evaders.
I think once the laws are made stricter the number of cases related to tax evasion would be reduced. The role of whistle blowers in this case will definitely change be helpful. If any of the employees of the organizations find that activities like tax evasion are going on they should immediately inform the authorities about the issue. Tax officials are required to scrutinize the corporations both big and small to find out the evaders. Above all Ethical compliance is very important. People do have the tendency to find ways to escape the being prosecuted in such case ethical reasoning and moral policing is very important.
Conclusion
Corporate social responsibility is not just limited to carrying out social activities. Every business organization is required to ethical in carrying out the activities. By being ethical, they pursue one of the important elements of corporate social responsibility. We see a number of ethical issues but one that I found serious was Tax evasion. So I proceeded with the topic and have discussed a number of issues related to tax evasion. I would like to end my discussion on a conclusion that objective of every business organization should be sustainability and not short term financial gains. Tax evasion might save some amount of money but that money cannot be used to regain the reputation and trust of the stake holders. In fact, a larger amount will have to be invested to fight the legal battles. So, it is always smarter to pay all the taxes that other business organizations pay.
References
Braithwaite, V. Ed., 2017. Taxing democracy: Understanding tax avoidance and evasion. Routledge.
Cheng, B., Ioannou, I. and Serafeim, G., 2014. Corporate social responsibility and access to finance. Strategic Management Journal, 35(1), pp.1-23.
Kolk, A. 2016., The social responsibility of international business: From ethics and the environment to CSR and sustainable development. Journal of World Business, 51(1), 23-34.
He, Y. and Lai, K.K., 2014. The effect of corporate social responsibility on brand loyalty: the mediating role of brand image. Total Quality Management & Business Excellence, 25(3-4), pp.249-263.
Korschun, D., Bhattacharya, C.B. and Swain, S.D., 2014. Corporate social responsibility, customer orientation, and the job performance of frontline employees. Journal of Marketing, 78(3), pp.20-37.
Mason, C. and Simmons, J., 2014. Embedding corporate social responsibility in corporate governance: A stakeholder systems approach. Journal of Business Ethics, 119(1), pp.77-86.
Park, J., Lee, H. and Kim, C., 2014. Corporate social responsibilities, consumer trust and corporate reputation: South Korean consumers’ perspectives. Journal of Business Research, 67(3), pp.295-302.
Shafer, W. E., Simmons, R. S., and Yip, R. W., 2016. Social responsibility, professional commitment and tax fraud. Accounting, Auditing & Accountability Journal, 29(1), 111-134.
Tai, F.M. and Chuang, S.H., 2014. Corporate social responsibility. Ibusiness, 6(03), p.117.
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