Creating Taxpayer Awareness: Corporate Social Responsibility and the Forums for Taxpayer- Tax Administration Dialogue Inter-American Center of Tax Administrations CIAT General Assembly 2011 Quito, Ecuador

2 Corporate Social Responsibility  CSR is a way of conducting business that takes into account the interests of all stakeholders, including society at large.  Triple bottom line: economic, social and environmental.  Contrasts with traditional view that shareholders are the only significant stakeholders.  Economic crisis highlighted (again) the social impact of corporate decisions.

3 Canada, Tax and CSR  The CRA has identified “Responsible Citizenship” as one element of a sustainable tax system. A sustainable tax system is one where taxpayers appreciate that paying tax is a civic responsibility that enables them to enjoy all the rights that accompany being a Canadian resident or business.  Initiatives to address individual and small business responsibilities… Teaching Taxes program Trades Schools initiative Underground Economy YouTube contest …but what about corporations?

4 The Position of Canada “If you’re doing business in Canada today, whether you know it or not, you depend on government services. To be profitable in business, you rely on […] good infrastructure to move product to market, a sound education system to draw on for a trained workforce, and health care to ensure that your employees are physically able to do their jobs. Without those basics, we don’t have a well-functioning state. So it is with the best interests of our country at heart, that we must all contribute our share.” -Former Minister of Revenue Gordon O’Connor to the Tax Executives Institute

5 Tax as CSR Activity in Canada  The Government of Canada has been supporting CSR for years. “Industry Canada promotes CSR principles and practices to Canadian businesses because it makes companies more innovative, productive, and competitive. CSR helps make Canadian business more competitive by supporting operational efficiency gains; improved risk management; favourable relations with the investment community and improved access to capital; enhanced employee relations; stronger relationships with communities and an enhanced licence to operate; and improved reputation and branding.”  The CRA has considered the notion of CSR as a means of reinforcing responsible tax practices in Canadian corporations.

Tax CSR Reporting in Canada  We are seeing a growing movement to include paying tax as a key element of responsible citizenship.  Some Canadian corporations have linked the payment of taxes to published CSR reports. e.g.: Sun Life Financial

7 Tax as CSR Questions  How to define “responsible tax practices” and a “fair tax burden” in a complex corporate environment? Where is the incentive for corporations to invest in CSR? “Stakeholders must perceive value in a certain CSR activity to support the firm’s engagement in it. This is particularly true for the customer, a key stakeholder for any business enterprise …Customers will favour CSR activities categorized as product-related over philanthropy and business practices” “Investing in CSR to Enhance Customer Value”, The Conference Board, February 2011 “…there is a ‘way to do tax’ that is responsible in its attitude to the society within which the company operates and which is good for business” “Tax and Corporate Social Responsibility”, KPMG, September 2007  What is the appropriate role for a tax administration?

8 The CRA Approach: Corporate Governance Tax administrations have a vital role to play in helping corporate boards in relation to their responsibilities for tax strategies and material outcomes. One of the things we’d like to do is work with institutes and academia that provide training regarding board roles, risk management and corporate social responsibilities, to ensure tax risk is part of their curriculum. Mrs Linda Lizotte-MacPherson, Commissioner and Chief Executive Officer of the Canada Revenue Agency

9 The CRA Approach: Large Business Compliance  Most important opportunities to advance responsible approaches to taxation occur during the regular meetings that the CRA holds with each large corporate tax filer.  CRA now adopting a new Approach to Large Business Compliance (ALBC), to be phased in over several years. ALBC benefits responsible corporations through a reduced compliance burden in exchange for transparency and a demonstrated history of responsible tax management. Population segmented into risk categories using a wide variety of quantitative and qualitative measures, applied annually. Demonstration of responsible corporate policies and behaviour is emphasized as an important precursor to a healthy working relationship with the CRA.

In Closing…  CRA supports the notion of Tax as a CSR concern, and is well placed to support it through our existing relationships and evolving practices.  We will promote the oversight of tax governance at the boardroom level.  We will ensure that our compliance approach to large corporations rewards responsible tax practices through reducing compliance burden and increasing tax position certainty at an earlier stage.  We will continue to promote awareness of the link between paying taxes and the programs and services that are funded as a result. 10