TAX PLANNING LAW AND CORPORATE GOVERNANCE: IN WHOSE INTEREST IS CORPORATE TAX PLANNING?

Abstract

There is a general assumption that tax planning activities are mainly in the interest of the company and its shareholders. However, this may not always be so. Therefore, the pertinent question begging for an answer is: In whose interest is corporate tax planning: the Board of Directors (managers) or the shareholders (company owners)? In this article, the author answers this question by examining the purpose of tax planning law and the motivational factor behind every tax planning activity by company directors. While the author explains tax planning and finds out that tax planning activities may actually benefit the company and its shareholders in the long run, depending on the company’s risk appetite, at times, directors deliberately embark on tax aggressiveness that will majorly favour them. This is part of the agency problem that has been in place since the time of Adams Smith. However, the promotion of the overall interest of the company should be the primary concern of directors. Thus, the author concludes that tax planning activities strategy must embrace an all-inclusive approach by ensuring that it is implemented in the interest of the company and all its stakeholders. He recommends an inclusive approach to the issue of tax planning for the benefit of all stakeholders without violating any tax law in place.