Tax and Corporate Governance: Exploring the Connect

Journal on Governance, Vol. 1, No. 5, pp. 451-463, 2012

15 Pages Posted: 28 Aug 2012

Date Written: August 20, 2012

Abstract

India’s tryst with corporate governance is not new, yet not ideal. When in 1996 the Confederation of Indian Industry (‘CII’) undertook the first institutional initiative on corporate governance in India (leading to the 1998 report on ‘Desired Corporate Governance: A Code’), the ideals of investor protection; increasing transparency in corporate management and decision-making; improving disclosure norms; etc. were in key focus. While substantial work has been done and various aspects of these areas highlighted, either in terms of the reports of the Committees constituted to this effect or through legal and regulatory initiatives, one cannot say with certainty even today of having attained a touch-stone for measuring corporate performance. The deficiency, if any, does not owe to the lack of attempts on the part of the key subject but is solely on account of the qualitative nature of the concept. ‘Corporate Governance’ per se is an evolving concept which seeks to enthrall within its ambit all desirable corporate managerial practices and putting in place in-built safeguards in corporate functioning and decision-making. ‘Tax Corporate Governance’, as a new leaf of this ever expanding ebb of corporate governance, finds focus in this paper.

On a conceptual perspective, ‘tax corporate governance’ relates to examination of inter-dependence of fiscal issues and policies with corporate governance practices. It encompasses not just the immediate choices relating to corporate decision-making such as location of plants in tax-efficient jurisdictions etc. but also key issues relating to corporate structuring, tax-impact disclosures, income measurement, financial reporting etc. Thus its coverage extends from a micro level examination of corporate decisions relating to an amalgam of commodity taxes, transactional taxes etc. to a macro level analysis of the impact of business taxes, fiscal policies and other related avenues for strategic decisions of the corporate enterprise. This paper makes an attempt to identify such linkages and thus serve as a backgrounder for the issue noting the documented studies on this perspective. An attempt has been made to ascertain and enumerate the issues which require specific addressing from a corporate governance perspective on the issues arising out of fiscal policies and practices in India.

Keywords: tax, corporate governance, India

JEL Classification: E62, G30, G34, G39, H20, K34

Suggested Citation

Jain, Tarun, Tax and Corporate Governance: Exploring the Connect (August 20, 2012). Journal on Governance, Vol. 1, No. 5, pp. 451-463, 2012, Available at SSRN: https://ssrn.com/abstract=2136787

Tarun Jain (Contact Author)

Supreme Court of India ( email )

New Delhi
India

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