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Review of Tax Incentives in the Context of CSR in Selected European Countries

Review of Tax Incentives in the Context of CSR in Selected European Countries
7 Dec 2011

More and more companies incorporate social and environmental factors and active dialogue with the business environment in their operations, but are they able to count on the support of the state in implementing their CSR strategies?

According to the report Review of Tax Incentives in the Context of CSR in Selected European Countries, prepared by Taxand Poland, European governments recognise the growing importance of practicing CSR in creating attractive business environment and decide on the introduction of incentives to support responsible business, although some areas are given greater support than others. This is primarily driven by the EU policy and market trends. The report was prepared by Taxand Poland in cooperation with Taxand in other European countries like Belgium, France, Finland, Greece, Norway, Spain, Romania, United Kingdom and Ukraine.

CSR still is a concept of voluntary integration of social and environmental concerns in business operations, a concept which remains largely unregulated by law. Nonetheless, governments of many countries have begun to see the benefits of CSR and take individual initiatives aimed at promoting corporate social responsibility. On the one hand, by progressive introduction of additional requirements for businesses, and on the other, by offering various forms of tax incentives. The Taxand Poland report provides a detailed analysis of the four major areas of the CSR concept, i.e the business, environmental, employment and social area, as well as the related tax incentives used in countries such as Poland, Romania, United Kingdom, Spain, Greece, France, Finland, Belgium, Norway and Ukraine.

The analysis makes it apparent that certain measures in the areas mentioned above are promoted more heavily by governments than others. Most of these incentives are designed to encourage environmental investments, charitable activities and employment of disabled workers. The most commonly used tax incentives include exemption or reduction of certain taxes and duties. The report also indicates areas were tax incentives for responsible businesses need to be introduced in the near future, such as buying products from local suppliers, production of healthy foods, and recycling and recovery of packaging.

'Lack of action on the part of public administration in this area creates a real barrier for organisations to invest in and develop local economies, which is not conducive to the cohesion and strengthening of local economic growth, especially in the context of support for less developed regions. On the other hand, lack of incentives to be more active in using more environmentally friendly packaging, in addition to already existing rules of recycling, results in the increased costs of recovery being passed on to consumers' says Robert Sroka, Head of CSR Projects at Taxand Poland.

In terms of tax incentives available for responsible businesses in Poland, it fares fairly well when compared to other European countries. The Polish tax system allows the companies to benefit from several minor tax reliefs, such as those related to employment of disabled people, creating new jobs in Special Economic Zones, donations for specific social purposes, investing in green funds. However, they are of little relevance to the daily business practice and thus fail to address the fundamental economic, environmental and employment concerns in the context of CSR.

'For some time we have been observing a growing interest in the issues related to sustainable development on the part of the European Union and national governments that recognise the benefits of activities undertaken by socially responsible businesses and are trying to promote them. Examples of existing solutions offered by the state administration in the area of taxation systems suggest a trend towards increased tax incentives and reliefs and a growing interest in CSR topics by businesses and state authorities in the years to come. This trend is also manifested in recommendations recently prepared by the Government Corporate Social Responsibility Team, aimed at developing CSR in Poland, which include provisions relating to tax policy of the Polish state' adds Robert Sroka.

Download the full CSR Review by Taxand Poland

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