KPMG, Tax and CSR

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KPMG has published another report on tax and CSR. I'm not pretending that this is a full review of that paper, which I received yesterday, but it is an initial reaction.

I have to be candid and think this paper is little better than KPMG's previous attempts at this. True, this paper tries to be balanced, and quotes a whole raft of stuff from me and my Tax Justice Network colleagues. But if you read it (and it's worth doing so) you'll come away from the experience feeling like a Polo mint. There's a hole in the middle of this paper.

Two immediate reasons come to mind. The first is that when all is said and done this paper feels like an uncomfortable compromise. To put it another way, it's seeking to discuss the issue without stating any real conclusion because to do so would compromise KPMG (the world's biggest offshore accountants) and those clients who use those services.

But more important is the fact that the paper includes the usual intellectual flaws that have characterised previous KPMG papers on this subject. Most especially I think this comment in the abstract is wrong:

Quantum is the only significant variable when assessing a company's tax contribution; in contrast to many other aspects of its business activity, the relevant question as regards its tax liability is not how it pays it, but only how much it pays.

Put simply I do not think the amount of tax paid is the only issue of concern when assessing a company's tax contribution. For example GlaxoSmithKline recently paid $3.4 billion of tax in the US. That's great you could say. But it was made to resolve a long running dispute on transfer pricing. Suddenly the payment acquires a different quality. It was not that of a tax compliant corporation, it was a payment reluctantly made in settlement of a dispute in which that corporation was found to have understated its liabilities in returns submitted over a considerable period of time.

Put another way, how you pay your tax is as important as how much tax you pay. KPMG have missed that point. It's why this paper still fails to deliver a convincing CSR argument because CSR is (as the paper admits) an approach to management, but KPMG having acknowledged the point make tax a simple issue of counting the cash paid. It isn't, and it never will be.