Sticks and Stones? How Companies Respond to “Tax Shaming”

By Lisa De Simone, Jeff Hoopes, Rebecca Lester, Sheila Melvin
2016 | Case No. A226 | Length 8 pgs.

An increasing number of global corporations have experienced negative publicity over complicated tax structures established to minimize their tax burdens.  In the case of U.S. companies, there has been a growing outcry over “inversions,” a means of restructuring the business so that the U.S. parent was replaced by a foreign parent entity in a nation with lower corporate tax rates.  Apple CEO Tim Cook was called to testify regarding Apple’s tax strategies by the U.S. Senate Permanent Subcommittee on Investigations in April 2013, and executives from Apple, Google, and Microsoft faced an Australian senate inquiry into their alleged tax avoidance in April 2015. Criticism of corporate tax planning—also called tax avoidance—was dubbed “tax shaming,” and even prompted consumer boycotts. Some analysts have suggested that companies begin considering tax policy as an aspect of corporate social responsibility, rather than simply a fiscal decision.

Even though many companies are affected by this “tax shaming,” a 2014 Ernst & Young survey of 830 tax and finance executives in 25 jurisdictions revealed that most had “little appetite” for directly engaging the media, with 65 percent agreeing (or strongly agreeing) that “engaging with the press on tax issues is a no-win proposition for business” and only 13 percent disagreeing. Results of the study notwithstanding, some companies did indeed respond to public pressure regarding their tax planning; this case describes some of these responses.

Learning Objective

To learn about how the public responds to tax planning activities of multinational corporations and how managers of these global corporations respond to public pressure. To analyze the stakeholders in corporate tax planning and governmental tax policy decisions as well as the ethical issues involved in tax avoidance.
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