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Long term interests of multinationals include socially responsible tax planning

Published: 24th September 2020 Last updated: 02nd September 2021

How can multinationals opt for socially responsible tax governance while upholding shareholders value? As long as managers act in the best long term interests of the corporation, they do not breach their fiduciary duty, argues law scholar Ave-Geidi Jallai. Even though tax avoidance and aggressive tax planning may be strictly legal, companies have a moral obligation to also engage in social responsibility when it comes to tax planning. Jallai defended her thesis at Tilburg University on September 23rd, 2020.

Legal tax planning can be carried out in various forms. Based on a degree of social legitimacy Ave-Geidi Jallai distinguished between tax planning, tax mitigation, tax avoidance and aggressive tax planning. Even though all of these kinds of practice are strictly legal, not all of them are socially legitimate. In the case of tax avoidance and aggressive tax planning, multinationals fail to contribute their fair share to society.

Taxation and society

As a result of legal tax planning that is not always socially acceptable, discussions of morality have entered the picture. Taxes provide funds for governments to offer essential public goods and to redistribute wealth among citizens. In other words, taxes enable the government to provide a (legal) framework for the functioning of society and the economy. Taxes also contribute to the well-being of corporations in other ways, as the state fosters innovation, encourages investment for sustainable growth, boosts worker productivity, and stimulates the efficient use of scarce resources. Based on that, it can be said that taxation is an essential precondition for the sustainable development of society -- including markets.


However, legal rules in a complex society inevitably leave room for different interpretations and choices with regard to the use of the system of tax rules. In case legal rules fall short, morality should fill the gap, according to Jallai. For multinationals Corporate Social Responsibility (CSR) can be seen as a tool to balance conflicting interests in a moral way.

Shareholder value

Some might believe that various other legal obligations, such as corporate governance rules, restrict corporations from opting for a moral business practices if it decreases shareholder value (in the short term). However, as long as managers act in the best long term interests of the corporation, they do not breach their fiduciary duty when engaging in good tax governance. This means paying fair share; developing tax codes of conduct, and being transparent.

The right to choose

According to Jallai, corporations have a right to choose the most effective way tax planning, as long as it is within the law. However, corporations that value their social license to operate and aim to morally account for their tax behavior should engage in good tax governance.

Note to editors

Ave-Geidi Jallai defended her PhD thesis on Wednesday 23 September. Title thesis: Good tax governance: International corporate tax planning and corporate social responsibility - Does one exclude the other? Supervisors: Prof. J.L.M. Gribnau, Dr. C.A.T. Peters. The dissertation can be downloaded here. For more information, please contact Ave-Geidi Jallai at