Corporate Social Responsibility and Corporate Income Tax: An Overview

• Main Author: David, Fátima
• Publication Date: 2008
• Other Authors: Gallego, Isabel
• Format: Article
• Language: eng
• Source: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Download full: http://hdl.handle.net/10314/999
• topic: Corporate Social Responsibility; Corporate Income Tax; European Union

The purpose of this research is to provide an overview of the interrelationship between corporate social responsibility (CSR) and corporate income tax (CIT) inside the international framework of the European Union (EU). The growing of firm's operations, including the multinational phenomenon of firms that operate in very different social and environmental settings, requires that the business activity must promote the social rights, develop CSR practices, encourage active civic duty, and find ways for the wealth redistribution, using the taxes for promote social justice. Following these practices, the tax regime of each Member State is a key factor that can negatively or positively influence the social responsibility posture of firms. In this context, accounting has a particular role as supplier of information's. The normative framework of the financial accounting and taxation suggest that a significant improvement exists actually in the European Union context, in relation to the international comparability of practices as well as in relation to a largest level of purification of the concepts. However, for a correct delimitation of the accounting and taxation functions, it is important that, on one side, the taxation standards do not result impositions that interfere in the essential function of financial information and, on the other hand, the accounting standards do not result distortions to the principle of equal treatment, increasing the level of risk on the normal competition of the firms. Although the international systems of accounting and taxation be very well developed with relationship to standards harmonization, it is important that firms incorporate the obligation to pay taxes in their code of conduct to encourage an active civic duty and to develop CSR practices at local, regional and international level. Effectively, the code of conduct should not only establish the fum's values and standards, but should also spell out essential practices and ethical behaviours.