University of Oregon's Lundquist College of Business and his co-authors compared the effective tax rates paid by a sample of American firms between 2002 and 2011 with a measure of those companies' CSR programmes compiled by MSCI, an index provider. It found that the companies which do the most CSR also make the most strenuous efforts to avoid paying tax and that those with a high CSR score also spend more lobbying on tax. The most obvious explanation for this inverse relationship is hypocrisy. Surely CSR depends on the idea that firms have an obligation to society, not just to shareholders? And surely the most basic obligation to society is to pay the taxes that support the poor and vulnerable? An other explanation is that firms are not monoliths but collections of rival fiefs with different priorities. The department that oversees the CSR programmes, and thus has an interest in boosting their budgets, may never talk to those in the finance department who are paid to minimise the tax bill.
University of Oregon's Lundquist College of Business and his co-authors compared the effective tax rates paid by a sample of American firms between 2002 and 2011 with a measure of those companies' CSR programmes compiled by MSCI, an index provider. It found that the companies which do the most CSR also make the most strenuous efforts to avoid paying tax and that those with a high CSR score also spend more lobbying on tax. The most obvious explanation for this inverse relationship is hypocrisy. Surely CSR depends on the idea that firms have an obligation to society, not just to shareholders? And surely the most basic obligation to society is to pay the taxes that support the poor and vulnerable? An other explanation is that firms are not monoliths but collections of rival fiefs with different priorities. The department that oversees the CSR programmes, and thus has an interest in boosting their budgets, may never talk to those in the finance department who are paid to minimise the tax bill.
The correct option is D The findings of a recent research suggest that companies with high expenditure on CSR also engage in greater tax lobbying. This could result from double standards or conflicting interdepartmental goals.
(a) only mentions the hypocrisy of companies but not the other reason i.e. interdepartmental conflict. (b) talks about public opinion, however the passage does not mention public opinion anywhere.
(c) states that there is an inverse relationship between spending on CSR and tax lobbying whereas the passage points to a direct relationship i.e. higher the CSR spending higher the tax lobbying.
(d) captures the relationship between CSR expenditure and Tax avoidance correctly and also the two reasons for the same provided in the passage.
(a) only mentions the hypocrisy of companies but not the other reason i.e. interdepartmental conflict. (b) talks about public opinion, however the passage does not mention public opinion anywhere.
(c) states that there is an inverse relationship between spending on CSR and tax lobbying whereas the passage points to a direct relationship i.e. higher the CSR spending higher the tax lobbying.
(d) captures the relationship between CSR expenditure and Tax avoidance correctly and also the two reasons for the same provided in the passage.
