Many large FMCG businesses now flaunt their ethical credentials, Corporate Social Responsibility programmes, being good corporate citizens, partnering with the communities they work within etc etc. It is part of modern corporate culture, and the CEOs walk and talk as if they are philanthropists.

I work for such a business and I find it hard to reconcile the idea of such talk, charity donations, partnering with local schools to "give back" when these businesses choose to base themselves here for tax reasons - to take money from the public coffers of the countries in which they are domiciled which could be used to build schools, hospitals and pay income support, and instead retain it for shareholders.

Don't misunderstand me, I think capitalism works and I am fine with the idea of shareholders taking maximum profits to be distributed in an economically efficient system back through pension funds etc etc - I am not suggesting not making profit.

But I just find that the idea of coming here to save hundreds of millions of dollars of money from the public purse is a little two-faced when these guys make public appearances next to Bono and Bill Gates in Davos and wring their hands discussing such things.

Am I right, or are there solid economic or ethical factors I'm missing?

Of course it's two faced. It's PR...what did you think?

I wish you were my boss.....i like your directness

Of course, i think so too.....I was just hoping that there was something I was missing, some Keynesian theory that could make it all seem less grubby!

That is the nice thing about being the CEO: you can be the philantropist with the company's money

1. 400 million USD per year in taxes and everyone things you're evil and greedy, or
2. 20 million USD per year in taxes, 10 million in charitable donations, and 60 million trying to publicise those donations.

You're 310 million USD in pocket and everybody loves you
Or doesn't think you're pure evil.

If people didn't misguidedly think every one or every thing with money basically stole it then the corporates wouldn't have to do the dance we all demand of them.

To me, the only thing a company owes is profit to it's shareholders.

You're missing something: Public companies (assuming yours is) are owned by the shareholders, and management's ONLY job is to maximize shareholder value. If shareholders want to redistribute that value to charitable causes, then they should do so. If shareholders want management to behave in a certain way OTHER than to maximize value, then they need to instruct management.

There is plenty of hypocrisy in financial markets and corporate behavior, but setting up a tax efficient home office is not one of them.

this. +1.....

I think it all depends on which company you are referring to, no doubt many of the late additions came for the taxes, but in the years shortly after WW2, Switzerland was chosen for stability reasons not taxes. That was the case for many of the large US companies with HQ operations here.

Jim.

Companies are like people: ubi bene ibi patria.
On a serious note, isn't their main goal to maximize the profit? That being through cuts in expenses (i.e. taxes) or increasing eficiency? From their point of view it's ethical..

How is this any worse than people doing it and not having a CSR statement or contributing society other than making sure some other government doesn't get their gold?

Not at all....I think the same as you all think. But (how can I say this politely), these are the obvious answers. Thats capitalism 1.01. Maybe thats because that is all there is to it....but I was wondering if there was something a little less obvious, some way of looking at it through economists eyes which said that the world is a better place in total by companies paying less tax....

In other words, if I said to me CEO, "Will you stop with the CSR crap until you pay taxes in the companies in which we operate?", would they say to me "Ah, but the thing you are missing is......."

But I guess not

Headquartering here doesn't bother me in the slightest.

The ethical question revolves around corporate taxes. But companies do not pay tax. Never have, never will. They can't pay it for the same reason they can't give you a hug: because they do not exist like you or I, but are an abstract (but useful) legal idea. The company tax is paid by either shareholders, employees, or passed on to customers. The cheque to the tax office might say XZY ltd on it, but that's accounting, not economics.

This report, not by an anti-tax thinktank but by the US congressional budget office, estimates 70% of the cost of corporate income taxes fall on employees.
http://www.cbo.gov/ftpdocs/75xx/doc7503/2006-09.pdf

If anything this means that Swiss corporate incomes taxes are still too high, because if you're in favour of a fair and transparent taxation system, the appropriate corporate income tax rate is zero.

Corporations are legal entities like you or I and so yeah they pay. It's weird obfuscation to say otherwise. Of course the cost gets passed on but no more than the personal tax of the owners of a company.

Errrrrrr.......what?

That's like saying that companies don't pay for the electricity that they use in their offices

They don't. See you've got it! Much like an airline passing on the cost of jetfuel to its customers through a fuel surcharge the electricity costs are probably getting passed on to customers. Or you could reduce profits (pass it on to shareholders) or reduce wages (pass it onto employees).

I know it sounds radical but put it this way: I the tax office is receiving money then from whom has it been taken? If the best answer is "the company" and we can't identify any people the it sounds like we've discovered a magical source of money that doesn't really belong to anyone. I

I think you _could_ make a case - how compelling is open - on either side of that line: (a) it is likely inefficient for companies to guess which charities their shareholders value, and taxes paid to govts are dead weight loss, so total utility of charitable giving (and social welfare generally) is higher if the company pays less tax and lets you do it - that's your econ 101 answer, I guess; or (b) there are informational asymmetries and other wedges between what the corporate makes and what the shareholder earns, possibly including important public goods aspects that only govts can handle well, in which case it is indeed hypocritical (that is what my liberal wife and parents would all argue!)

Legally absolutely yes, but economically no.

The thing I'm sure a lot a folks out there think "McDonalds should pay more tax", but if the reality of implementing that means 19 year old burger flipper pays most of it we ought to be more careful.

Its a bit of a stretch to argue that.

The price that a company charges for a good is the price that the market will stand. The difference between that price and the cost of producing it is what the company keeps. If the company pays more or less for its electricity (i mean because it leaves its lights on, not because the global price of electricity increases so the whole market increases), the price it can charge for the goods doesn't increase.

So it cannot pass on its inefficiency of leaving its AC on in winter - the company pays that it.

So it doesn't sound radical, it sounds wrong

Huh? Electricity price goes up, income stays the same, profit goes down. Profits get passed on to shareholders (or maybe employees via a bonus scheme) so the shareholders are bearing that cost, no?
If the company pays for it out of money they've saved, then company assets (bank account in this case) are decreasing, this is a cost to shareholders too. Not saying it always goes to employees, but the report says mostly it does

Ah, in that case I agree - I thought you were arguing that the consumer pays.

Well, then we get into a more esoteric point about what is the company if not the shareholders....but I follow you now