Responsible Tax as Corporate Social Responsibility: The Case of Multinational Enterprises and Effective Tax in India

Business and Society, Forthcoming

41 Pages Posted: 28 May 2012  

Alan Muller

University of Amsterdam Business School; University of Washington - Michael G. Foster School of Business

Ans Kolk

University of Amsterdam Business School

Date Written: May 28, 2012

Abstract

Anecdotal evidence often suggests that multinational enterprises (MNEs) operating in developing countries “exploit their multinationality” to avoid paying taxes to host governments. This article explores the concept of “responsible tax” as a corporate social responsibility (CSR) issue for MNEs, based on the notion that MNEs face considerable variation in the extent, monitoring, and application of tax laws internationally. This variation creates a “moral free space” as to which tax payments to make. Using firm-level data from three important sectors in India, the authors explore whether foreign MNE subsidiaries pay higher taxes than local firms, and whether, in the case of MNEs, there are differences between subsidiaries of MNEs with and without a reputation for CSR. The results for India show that MNEs pay considerably higher effective tax rates than do local firms, and MNE subsidiaries known for CSR pay more tax than do MNE subsidiaries less known for CSR. This set of findings suggests that MNEs operating in India see taxation in developing countries in relation to CSR.

Keywords: corporate social responsibility, taxation, developing countries, multinational enterprises, local companies, India

JEL Classification: D21, E62, F23, H25, H26, H71, K34, L1, L2, M14, M4

Suggested Citation

Muller, Alan and Kolk, Ans, Responsible Tax as Corporate Social Responsibility: The Case of Multinational Enterprises and Effective Tax in India (May 28, 2012). Business and Society, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2069214

Alan R. Muller

University of Amsterdam Business School ( email )

Plantage Muidergracht 12
Amsterdam, 1018TV
Netherlands

HOME PAGE: http://www1.fee.uva.nl/pp/amuller

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

Ans Kolk (Contact Author)

University of Amsterdam Business School ( email )

Plantage Muidergracht 12
Amsterdam, 1018 TV
Netherlands
+31 20 525 4289 (Phone)
+31 20 525 5281 (Fax)

HOME PAGE: http://www.anskolk.eu

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