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Tax avoidance and NGOs

Martin Hearson, 11th July 2011, Oxford Centre for Business Taxation summer conference

ActionAid UK

on 11 July 2011

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Transcript of Tax avoidance and NGOs

There is a business case for applying CR tools to tax planning 1 Tax is becoming an essential part of the CR agenda 2 Oxford Centre for Business Taxation Summer conference, July 2011 Martin Hearson NGOs and corporate tax avoidance Compliance with the letter of the law is no longer sufficient 3 Transparency can reduce reputation risk 4 Tax responsibility is qualitative, not quantitative 5 Email: martin.hearson@actionaid.org
Presentation: http://bit.ly/hearson2011ocbt
Briefing: http://bit.ly/taxandcsr Thank you “One of the most pressing issues facing our continent is to embark on a path to free African countries from their dependence on foreign assistance and indebtedness. An indispensable condition of this is the strengthening of our capacity to mobilize domestic resources.”

- African Tax Administration Forum, 2008 “Corporation tax issues seem to be too complex or obscure for the media and the public to understand. Accordingly, the issues are not covered in the media or they go unnoticed by the public.”

“One HMRC representative and two business respondents acknowledged that it is possible tax will become important to CSR in the future. They thought this would happen only if the media and the public begin to focus on taxpaying and tax planning as important social issues.”

- Moving beyond avoidance? Tax risk and the relationship between large business and HMRC. Oxford University Centre for Business Taxation, 2007 1. Has there been a step change in the media attention devoted to tax planning? 2. Has tax planning become more of a 'social' issue? “To service UK huge debt, the middle classes are paying ever more tax. Yet a group of the country's biggest firms are moving offshore – and denying the UK exchequer hundreds of millions.”

- Daily Mail, December 2010 “Aggressive tax avoidance is a serious cancer eating into the fiscal base of many countries.”

- Pravin Gordhan, Finance Minister, South Africa, May 2009 “Tax is becoming an important source of reputation risk...campaigners have begun to focus on it with the same zeal as they apply to more immediately emotional issues such as the environment or child labour.”

- Financial Times, November 2010 “More than one tax strategy we have seen have included policies such as 'We will not undertake any tax planning transaction which would reflect adversely on the group if details of it were to be published in the business pages of [Daily Newspaper Title].'”

- Tax risk management. PriceWaterhouseCoopers, 2004. Specific risk areas
1 Transactional risk
2 Operational risk
3 Compliance risk
4 Financial accounting risk

Generic risk areas
5 Portfolio risk
6 Management risk, and
7 Reputational risk

- Tax risk management. PriceWaterhouseCoopers, 2004. Risks associated with tax planning “Arrangements that minimise the amount of tax paid in the short-term may be detrimental in the longer term...An aggressive tax strategy might require considerable resources to be applied to manage the positions taken.”
- Henderson Global Investors, 2005

“Reputational damage may lead to liabilities for external costs associated with a company’s operations, greater difficulty in permitting that could lead to project delays or cancellation or the loss of favourable tax status or other forms of government financial assistance.”
- Calvert Investments, 2010 “The traditional defence of compliance is dead; the distinction between evasion (illegal) and avoidance (lawful) has dissolved in the eyes of governments, NGOs and citizens.” - Corporate Citizenship, 2011 Investor viewpoints Before the storm? 6 NGOs' role is to:
Raise issues of concern
Create pressure for change
Follow businesses and governments to ensure that issues are resolved.

NGOs' responsibility is to:
Speak out
Listen and engage with stakeholders
Be proportionate in their actions http://bit.ly/callingtime
Full transcript