Tax deductions urged to support corporate social responsibility
Tax deductions urged to support corporate social responsibility
The Jakarta Post
Jakarta
Despite the old adage that giving should be devoid of ulterior
motives, tax deductions should nevertheless be offered to entice
companies into fulfilling their social responsibilities, activists say.
"The government could introduce tax deductions as an incentive
to businesses practicing CSR (corporate social responsibility),"
Transparency International Indonesia secretary-general Emmy
Hafild said.
CSR is a commitment by a business to contribute to sustainable
economic development of workers, the local community surrounding
the company, and society at large to improve the quality of life
in ways that are good both for business and for development, she
said recently.
The practice of giving tax incentives to firms to support
their social activities has long been common in several Asian
countries, such as the Philippines, as well as developed
countries like the United States and the United Kingdom.
In the Philippines, the Philippine Business for Social
Progress, an independent organization providing CSR consultancy,
has developed a self-taxation system for companies by allocating
one percent of their net profit to social development projects.
Meanwhile, the United States and the United Kingdom have
implemented what is called the Socially Responsible Investment
(SRI) scheme, which offers incentives to investors who sustain a
triple bottom line -- the economy, social development and
environmental protection -- scenario for their businesses.
Currently, some 12 percent of the investment funds managed in
the United States come from the SRI scheme.
At the global level, multistakeholders supported by the United
Nations have developed the Global Reporting Initiative, which
contains a set of guidelines on how to report a company's
performance regarding social and environmental issues.
The Office of the State Minister for the Environment
introduced a similar system, known as Sustainability Reporting,
earlier this year, which could be used as a basis for providing
tax deductions so as to encourage the development of corporate
social responsibility.
Indonesian Consumers Foundation (YLKI) chairwoman Indah
Suksmaningsih supported the idea, saying it could provide an
alternative channel for funding community development.
"The latest survey by the YLKI shows that 41 percent of our
respondents doubted whether tax-generated revenue was actually
used for development," added Indah.
However, giving tax breaks for companies engaging in social
activities, said sociologist Imam B. Prasodjo, must be done
carefully, as the potential for abuse of tax law in Indonesia was
high.
"The government should start by giving tax incentives to
companies that have carried out their social responsibilities
properly and are recognized as good taxpayers," he said. "It is
like saying, as a good citizen you are qualified for a tax
break."
Imam suggested that the government set up an independent team
to study the actual implementation of corporate social activities
and to survey how effective the fund was in developing
sustainable economic growth.
"The introduction of tax incentives should not raise new
problems. Thus, there must be proper administrative and field
audits of the companies," he added. "A better system of taxation
must be prepared beforehand to avoid losses arising through the
extending of tax incentives."
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