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Responsible Tax as Corporate Social Responsibility: The Case of Multinational Enterprises and Effective Tax in <st1:country-region w:st="on"><st1:place w:st="on">India</st1:place></st1:country-region>

Alan Muller and Ans Kolk

Business Society published 24 July 2012, 10.1177/0007650312449989
http://bas.sagepub.com/cgi/content/abstract/0007650312449989v1

Anecdotal evidence often suggests that multinational  enterprises (MNEs) operating in developing countries

"exploit their multinationality" to avoid paying taxes to host governments. This article explores the concept of

"responsible tax" as a corporate social responsibility (CSR) issue for MNEs, based on the notion that

MNEs face considerable variation in the extent, monitoring, and application of tax laws internationally. This variation creates a

"moral free space" as to which tax payments to make. Using firm-level data from three important sectors in

<st1:place w:st="on"><st1:country-region w:st="on">India</st1:country-region></st1:place>, the authors explore whether foreign MNE subsidiaries pay higher taxes than local firms, and whether, in the case of MNEs,

there are differences between subsidiaries of MNEs with and without a reputation for CSR. The results show that MNEs pay

considerably higher effective tax rates than do local firms, and MNE subsidiaries known for CSR pay more tax than do MNE

subsidiaries less known for CSR. This set of findings suggests that MNEs operating in <st1:country-region w:st="on"><st1:place w:st="on">India</st1:place></st1:country-region> see taxation in developing

countries in relation to CSR.

Duane Windsor, BAS Editor, <st1:place w:st="on"><st1:placename w:st="on">Rice</st1:placename> <st1:placetype w:st="on">University</st1:placetype></st1:place>

odw@rice.edu

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