BUSINESS BENEFITS SOCIETY

The basic objective of business is to develop, produce and supply goods and services to customers. This has to be done in such a way as to allow companies to make a profit, which in turn demands far more than just skills in companies own fields and processes. Astute entrepreneurs often demonstrate an almost intuitive understanding of the synergies that create success. The social skills of company owners, together with relationships maintained with customers, suppliers and other business people, are always vital if companies are to be run well and developed with a view to the future. Companies improve their resources by developing materials and ideas. The goods and services produced must meet demands made by customers, other companies or public institutions if companies are to survive. Profitability results when customers are prepared to pay more for goods and services than it costs to produce them. The ability to produce this kind of added value profit is the basic prerequisite for business, but it is also a foundation for prosperity in society. Only profitable companies are sustainable in the long term and capable of creating goods, services, processes, return on capital, work opportunities and a tax base. This is what business does better than any other sector. Hence, companies basic commercial operations are the primary benefit they bring to society.
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Companies benefit society by:

Supplying goods and services that customer cannot, or do not want to, produce themselves Creating jobs for customers, suppliers, distributors and coworkers. These people make money to support themselves and their families, pay taxes and use their wages to buy goods and services Continually developing new goods, services and processes Investing in new technologies and in the skills of employees Building up and spreading international standards, e.g. for environmental practices Spreading good practice in different areas, such as the environment and workplace safety Figure 1 Companies benefit society by The role of business in the development of society can be described in many ways. For a company to progress and develop, it must nurture relations with its stakeholders, of which there may be many. Some have a strong influence and are of fundamental importance to the survival of the company: these include employees, customers and suppliers. The media, authorities, trade unions and local residents are other stakeholders with a wideranging influence.

Responsibility towards government Business activities are governed by the rules and regulations framed by the government. The various responsibilities of business towards-government are:

1. 2. 3. 4. 5.

Setting up units as per guidelines of government Payment of fees, duties and taxes regularly as well as honestly. Not to indulge in monopolistic and restrictive trade practices. Conforming to pollution control norms set up by government. Not to indulge in corruption through bribing and other unlawful activities. Responsibility towards society A society consists of individuals, groups, organizations, families, etc. They all are the members of the society. They interact with each other and are also dependent on each other in almost all activities. There exists a relationship among them, which may be direct or indirect. Business, being a part of the society, also maintains its relationship with all other members of the society. Thus, it has certain responsibilities towards society, which may be as follows:

1. 2. 3. 4. 5.

to help the weaker and backward sections of the society to preserve and promote social and cultural values to generate employment to protect the environment to conserve natural resources and wildlife

6. to promote sports and culture 7. To provide assistance in the field of developmental research on education, medical science, technology, etc.

Does a company's responsibility to society start with paying its taxes?

No company likes paying tax, particularly relating to income says Dermot Egan Photograph: Andy Hall

Death and taxes were the only two certainties in this world according to Benjamin Franklin. While there is little disputing the certainty of death, there have always been companies determined to challenge the inevitability of taxes.

No company likes paying tax, particularly relating to income. Having a significant proportion of your earnings siphoned away is difficult, particularly when you have no direct control on how it will be spent. But for most companies there is an acceptance that tax, however unpalatable, is an inevitable part of doing business. For some social businesses such as the IT training company Happy there is a recognition that tax forms a social contract between companies and government. In exchange for tax, companies can expect government to deliver a secure environment, a well-educated workforce and a comprehensive transport infrastructure; all vital conditions for businesses to grow and develop. The majority of companies don't share this magnanimous view but do pay most of their taxes. But an increasing number are engaging in legal tax avoidance on a significant scale, effectively dodging taxes through exploiting legal loopholes and taking advantage of tax breaks. An entire industry has grown up around tax avoidance (or "tax mitigation" to use its polite term) as companies pay professionals to find ever more elaborate methods of avoiding tax. As global markets have opened up, so have the opportunities for avoiding tax. The amounts involved are staggering. In 2002 Ernst & Young was pitching a tax avoidance scheme known as Toms (tax efficient off-shore market swaps) to large UK companies, including the insurer, Prudential. Its fees for the scheme amounted to 500,000 for each participating company. The losses to Her Majesty's Revenue and Customs (HMRC) would have been in excess of 1bn. In that instance HMRC was forced to act to try and protect its tax revenues but other tax-saving schemes are constantly in operation. It is estimated that the HMRC loses out on 9-12bn each year from corporate tax avoidance. The perception of tax from companies, particularly larger, publicly owned businesses, seems to be that it is simply another cost that should be minimised. Every extra pound paid in tax is effectively another pound that is not returned to shareholders. Tax avoidance has become such an accepted norm that even companies such as Vodafone and Alliance Boots, who place a large emphasis on their corporate responsibility, see no contradiction in actively avoiding paying huge amounts of UK tax through declaring their profits in more tax efficient territories. Even Google, whose motto is "Don't be evil", does not seem to count avoidance of tax as bad. Google has managed to avoid paying $3.1bn (1.9bn) in the last three years by moving most of its foreign profits through Ireland, Netherlands and Bermuda. This effectively means that Google is paying tax at a rate of 2.4% on overseas profits, making it the envy of many other global companies. As governments across the western world look to cut their spending and reduce their budgetary deficits, often at the expense of the poorest, it seems appropriate to ask the question: is it socially responsible for companies to deprive the communities in which they operate of their tax revenue? Companies spend a lot of time and money on improving their corporate image and stressing their commitment to the community, but it's difficult to take them seriously if those same companies are simultaneously depriving those communities of tax income that could be spent on their development. While some market liberals may feel that private companies would

spend the money more wisely than government, they're missing the point. Those companies haven't been democratically elected to spend money on the citizens behalf and there is little guarantee that any of the money saved in tax will ever be spent on those communities where it was generated. Another effect of corporate tax avoidance is that it undermines confidence in the tax system. Corporate tax in the UK is founded on the principle that there is one main percentage tax rate for all companies. In theory, the more profit you generate the more tax you pay. But if in practice more profitable companies end up paying relatively less tax because they can afford better tax advice, then belief in the equity of the tax system begins to erode. It seems strange, in an era where companies are placing a greater emphasis on their contribution to society, that tax avoidance has become so prevalent and such accepted practice. It would be naive to believe there will ever be a time when all companies cease attempting to avoid tax. Whenever there is a system, there will always be those who seek to subvert it. But surely if we are to take any company's claim to be socially responsible seriously, we must at least expect it to begin by paying its fair share of taxes. This content is brought to you by Guardian Professional.