The recent wave of corporate inversion transactions, in which domestic companies essentially move their headquarters abroad to lower their U.S. tax bill, is just the latest in a decades-long trend of aggressive tax avoidance behavior by corporations. From the government’s perspective, inversions and other tax avoidance strategies erode the U.S. tax base and impose a costly enforcement challenge on Treasury and the IRS. But from the perspective of corporate managers, aggressive tax planning may simply be part of the corporation’s duty to maximize shareholder value. Reuven Avi-Yonah questions this latter proposition in Just Say No: Corporate Taxation and Corporation Social Responsibility. He offers a compelling argument that corporate managerial duties are not hopelessly at odds with the goal of promoting better corporate tax compliance.
Avi-Yonah frames the issue of corporate tax avoidance as one of corporate social responsibility (CSR). If it is legitimate for corporations to engage in activities that do not directly benefit shareholders—for example, involvement in philanthropic causes—then it should be legitimate for corporations to act as good tax citizens. On the other hand, if CSR is outside of the scope of legitimate corporate functions, then presumably corporations should seek to minimize their tax liability as much as possible. Continue reading "Do Corporate Managers Have a Duty to Avoid Taxes?"