Why MNCs HAVE responsibility to pay tax?

 Why MNCs HAVE a responsibility to pay tax?

I. Commit Corporate Responsibility

    First of all, paying tax into public finances is clearly part of how business contributes to society, giving back to society while taken from it, in other words. As we all know, ​taxes provide essential public revenues for governments to meet economic and social objectives​, those can contribute to improving public living standards. For example, the government can invest more expenditure on education and provide free education to the students and improve their upward mobility.

    Once the country meets its basic expenditures, it will have a surplus to solve other important but non-emergency infrastructure like setting up community centres, so that folks in poor countries can have the right to enjoy social and entertainment activities, and further improve their living standards. 

II. Tax avoidance is legal but “morally wrong”

    As we aforementioned, unlike the tax evasion, tax avoidance is a legal measure to minimize the tax payable in current legal meaning, but it is morally wrong to some extent, especially it may deprive poor countries of revenue​. 

    In fact, the dependency of corporate income taxes of developing countries is much greater than the developed, it accounts for 21% of government revenue, higher developed than 10%. In this case, developing countries often be more vulnerable to the impact of corporate tax avoidance. The data stated, developing countries also lose a greater proportion of their GDP to corporate tax avoidance than OECD countries (1.7% rather than 0.5%), amounting to $212 billion per year.​

III. The new era of incorporate taxation in CSR

    Using emotive languages such as tax abuse, tax cheating, and tax dodging, NGOs have convinced many that companies should not just pay the least they can, but contribute a “fair share”, based on their economic activity in each country. They seem to have swayed the court of public opinion, as a recent survey of British adults (PDF) found that 85% agreed “tax avoidance by large companies is morally wrong, even if it is legal”. It implies that the public considers paying tax as the key to respecting fundamental human rights and create fairness competitive the business environment. ​​

    In the NGO arena, activist campaigns, one of the main tools civil society has traditionally used to pressure TNCs in relation to other CSR issues, are now being used for taxation. Action Aid (2012), UK Uncut (2014), and other organizations have launched several name and shame campaigns to raise awareness of irresponsible tax practices, calling for a consumer boycott.​ 

    Take the Norwegian company Statoil as an example, it has also won praise for its “historic transparency move” of publishing a comprehensive report of its payments to governments for oil extraction.​ As an oil and gas company, its energy extraction process will inevitably involve environmental pollution in the affected countries, for example, oil leakage will pollute groundwater and soil, making farmland impossible to cultivate; if it occurs in offshore oil wells, it will pollute water quality and affect marine ecology. In order to eliminate the environmental impact, Statoil estimates the gas and water pollution emitted from its extracting process and pays taxes to the government based on the amount of pollution (e.g. GHG emission taxes). It is, arguably, a values-based company that sought to cooperate with the government, compensate by paying tax and be responsible for the environment, to establish a greener energy development.