Sikka, P. (2010). Smoke and Mirrors: Corporate Social Responsibility and Tax Avoidance. Accounting Forum, 34, 153-168.
The article, Smoke and mirrors: Corporate social responsibility and tax avoidance by Prem Sikka was published in the United Kingdom to discuss the relationship between corporate social responsibility and corporate tax avoidance. The target audience for this journal article is the general public and the corporate sectors which have been brought to light on the issues of tax evasion. This is a very reliable source that has been peer-reviewed and up-to-date. The author of the article is an established professor of accounting with knowledge and adequate information on the importance of tax compliance. This information that Sikka raises in this article is important because it exposes a corporate behavior that is not widely known by many. This information will give insight to authorities concerned on the need to fully evaluate a corporate organization's tax obligation and whether it is fulfilled.
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The article is about the behavior of corporations in defining ethical practises and scope of work in their code of conduct which they go ahead to implement in the paper but in the actual sense, most of these corporations engage in simultaneous tax avoidance which makes the implemented ethical practises questionable. The paper points out a form of hypocrisy by corporations and a further broken interconnection between corporations’talk, decisions and actions (p.155). In the abstract, the writer puts it clear that corporate social responsibility has widely been embraced by most corporations but the very corporate social responsibility has not been taken seriously on issues of tax avoidance. This behavior is outlined by the author as affecting government in the provision of social amenities. These numerous revenues made and avoided by these corporations could make a difference in many lives, Sikka claims.
The content presented in Sikka’s paper does not have proper theoretical and methodological approaches that show evidence of Sikka’s own work. Although the author provides case studies that illustrate the connection between corporate social responsibility and taxation, in bringing out their corporate practices, the author only provides references from various documents and not a complete representation of the examples. Some of the companies which Sikka provides as case studies, for instance, include Ernst & Young, KPMG, Wal-Mart and Deutsche Bank whose cases have been presented by parliamentary committees, courts as well as investigative journalists. Relying on evidence that has been earlier presented raises questions on the standards of evidence used. Although the purpose of the article is well articulated, back up evidence used by Sikka is rather a repeat of what had already been brought to public attention. It would have been more compelling if Sikka in his research would have focused on other case studies to inform the general public on the issues presented.
The information presented by Sikka may not require any consideration of a background. The article comprehensively provides a good evidence of corporate practices of companies such as KPMG to make any reader understand how corporate social responsibility shelters some ills among corporations. The author further insists that payment of agreed tax is a test to corporations on their social responsibility. However, the article does not provide detailed considerations that the state, law , media or other institutions should do to tackle individuals and corporations that avoid taxes. Apart from the available structures, which are still inefficient, are there any other methods that can be used? A number of perspectives are presented here. They include tax responsibility, the advantages that the revenue collected from tax have on the economy and corporations’ obligations.
If given an opportunity to investigate Sikka’s subject, I would investigate if the action of government on tax avoidance is fully implemented and whether a change has been impacted.
