Sustainable Tax Governance and Transparency

Abstract

The relationship between tax and sustainability is not an easy one. Tax specialists do not readily combine those two topics with regard to public tax governance, let alone the tax governance of corporations. One thing that is troubling the relationship between tax and sustainability is transparency. For tax experts, at first sight, tax and sustainability meet in environmental taxation. On further reflection the requirement of sustainability can be applied to tax legislation and the tax system as whole - which both demand good tax governance. Sustainable tax governance thus requires the state to pay due attention to the quality of tax legislation. However, the concept of good tax governance does also regard taxpayers. Taxation is a fundament for a well-functioning society and sustainable development. Therefore, it will be argued that paying corporate taxes can be seen as part of companies' corporate responsibility to contribute to the sustainable development of society. Corporate scandals and news on corporate aggressive tax planning practices have increased demands for corporate accountability. To answer the question whether corporations’ tax planning policies are really sustainable if they minimize the amount of tax they pay, this paper will explore corporate taxation in the context of corporate social responsibility (CSR). Here, CSR is used as a proxy for sustainability. A notion of good tax governance as a response to demand of sustainable and responsible tax planning will be proposed. Furthermore, it will be argued that without greater transparency it is impossible to evaluate whether corporations are truly sustainable, nor is it possible to hold corporations accountable for their tax behavior. Good tax governance entails transparency — a necessary if challenging prerequisite for sustainable tax planning.