Corporate Social Responsibility Essay: Tax Evasion and Business Ethics

This essay explores the concept of Corporate Social Responsibility (CSR) and its practical application, with a specific focus on the ethical implications of tax evasion. The essay begins by defining CSR and the stakeholder theory, emphasizing the impact of business decisions on society. It then delves into the issue of tax evasion, defining it as an illegal activity and analyzing its effects on various stakeholders, including governments, employees, and customers. The discussion further examines the relationship between tax avoidance practices and CSR, highlighting the potential damage to a company's reputation and the legal consequences of non-compliance. The essay also addresses the main issues related to tax evasion, such as the role of tax officials and the ineffectiveness of current legislation. Moreover, it explores the connection between ethical branding and corporate reputation, and provides recommendations for future improvements, including stricter laws and the role of whistleblowers. In conclusion, the essay emphasizes the importance of ethical behavior and sustainability over short-term financial gains in achieving true CSR.

Running head: CORPORATE SOCIAL RESPONSIBILITY
Corporate Social Responsibility
Name of the Student:
Name of the University:
Author note:

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Introduction
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).
Impact of Tax Evasion
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).

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CSR and Tax avoidance practices
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.
Main issues related to Tax evasion
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

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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).
Relationship between ethical branding and corporate reputation
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.
Tax evasion legislation
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

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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.
Future and Recommendations
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

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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.

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References
Braithwaite, V. Ed., 2017. Taxing democracy: Understanding tax avoidance and evasion.
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Cheng, B., Ioannou, I. and Serafeim, G., 2014. Corporate social responsibility and access to
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Kolk, A. 2016., The social responsibility of international business: From ethics and the
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Shafer, W. E., Simmons, R. S., and Yip, R. W., 2016. Social responsibility, professional
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