Acceptable levels of tax risk as a metric of corporate tax responsibility: theory, and a survey of practice

Abstract

Prescribed levels of acceptable tax risk are increasingly used to articulate degrees of corporate tax responsibility, but the theoretical basis for doing so is not well established. This article (i) develops a theory of the relationship between tax risk and tax responsibility and (ii) shows that acceptable levels of tax risk could be used as a meaningful metric for these purposes, provided that the filing positions a n ticipated from proposed planning are reviewed against the prescribed level of acceptable risk without taking into account any mitigation of the risk factors that are introduced by the planning. Further, the article reviews the evolving tax risk policies of 20 large European companies, showing that while some progress is being made towards meaningful discourse, even the companies with the most well-developed policies are still making their claims in such a way as to conflate socially responsible tax behavior with diligence in implementing antisocial tax behavior.