Cross-Border Corporate Social Responsibility and Taxation: A New Conceptual Framework in an Era of Economic Globalization

Abstract

While only several decades ago, the idea of corporate social responsibility was not trivial, it seems that most scholars today understand that corporations owe special commitments to their stakeholders which go beyond common regulatory and conventional requirements in promoting the community in which it operates. However, while “translating” such a notion to real life and prioritizing these commitments among the corporation’s stakeholders in a corporation that operates domestically is not self-explanatory, translating it in the cross-border context is even more challenging.

This paper attempts to take the notion of CSR a step forward and as global commercial relationships bring our world closer into a global village, and to question “who is thy neighbor?” and in our context “who is thy stakeholder?” and proposes a new conceptual framework in how tax revenues should be allocated among countries in which multi-national corporations operate in an era of globalization. This issue was less relevant fifty years ago when most economic relations were within the boundaries the boundaries of their locality or domestic state we now live in an era of economic globalization and the time has come to update the CSR framework accordingly.

This paper is divided into five parts. Part I, provides the background to the theory of “Corporate Social Responsibility” and the exposure corporations currently have to foreign markets. Part II provides a concise overview of what we believe are the most significant milestones in the development of the social responsibility theory. Part III provides an overview of the linkage between corporate social responsibility and taxation. Part IV attempts to make the case for the expansion of social responsibility beyond the scope of domestic activities, shows the importance of cross-border social responsibility in general, and demonstrates how cross-border social responsibility is applied in the context of taxation. Finally, part V connects the dots between all the statements and arguments made in this paper and proposes a new conceptual framework that should be applicable to Multi-National Corporations (MNCs) in eliminating strategic tax behavior and in allocating MNC’s corporate tax revenues among the countries in which they operate in a fair manner.

Keywords: CSR, Corporate Social Responsibility, Tax, International Tax, Corporate Tax, Tax Policy, ESG

JEL Classification: K1, K2, K10, K20, K34, O1, O2, O20, O38,