Responsible Investment: Taxes and Paradoxes

Abstract

Taxes have become an issue of corporate social responsibility (CSR), but the role of taxation is to some extent an ambiguous and controversial issue in the CSR framework. Similarly, another unclear question is what role investors who are committed to sustainable and responsible investment (SRI) see taxes as having on their environmental, social, and governance (ESG) agenda. Corporate taxes have an inverse relationship with the return of the investors: taxes paid directly affect what is left on the bottom line, reducing the return of investors. However, investors are now more aware of tax-related risks, which can include different forms of reputation risk. Corporate tax planning may increase the returns, but those increased returns are riskier. This study focuses particularly on the relationship between SRI and taxation. We find that tax matters are considered to be on the ESG agenda, but their role and significance in the ESG analysis is unclear.

The Laffer Failure: Lower Tax Less Representation

“…2012), so as to never reach the ideal tax neutrality. Recent hot discussion on ESG issues is another example to understand an innovative rule of environmental, social, and governance that should be well designed to rebuild the values for international experiences in order to merge differentials into a consensus framework of financial planning (Knuutinen & Pietiläinen, 2017). At this consideration, social moral norms could be in line with rather to impair the economic efficiency.…”

Optimal growth under socially responsible investment: a dynamic theoretical model of the trade-off between financial gains and emotional rewards

“…The areas where SRI is relevant are also the areas where negative externalities tend to exist and, in this way, SRI is an immediate market response to a series of problems that, in a second stage, public authorities might intervene upon. According to Knuutinen and Pietiläinen (2017), public policies aiming at fighting less responsible procedures and actions by firms are perceived by investors as an incentive to continue to pursue themselves an ethical financial behavior.…”