Governance, Risk, and Compliance Handbook: Technology, Finance, Environmental, and International Guidance and Best Practices

CHAPTER 4

TIME TO RETHINK THE CORPORATE TAX

Ann Cullen

4.1 Q&A WITH MIHIR DESAI

4.2 ABOUT FACULTY IN THIS ARTICLE

(a) Links to Related Works by Mihir A. Desai

4.1 Q&A WITHS MIHIR DESAI

Published: Ann Cullen Interview in the Harvard Business School: Working Knowledge, "Time to Rethink the Corporate Tax System," July 18, 2005, (http://hbswk.hbs.edu/item/4902.html).

Corporations have traditionally considered taxes a painful but necessary cost of doing business. But this view has changed, says Harvard Business School professor Mihir A. Desai. With the advent of sophisticated tax shelters, global tax-reduction opportunities, and high-priced finance experts focused on the issue, corporations are turning the tax function into a profit center, says Desai, an expert on international corporate and public finance.

In this e-mail interview, Desai discusses new ways businesses are looking to shrink their tax obligations, how the commonly accepted dual-book system may ultimately harm shareholders, and the role boards of directors play in making sure their companies stay within the rules.

Ann Cullen: How has the way corporations view taxation changed?

Mihir A. Desai: There is growing evidence that the tax function within corporations has shifted from being a compliance function to being a profit center. The ratio of corporate taxes to gross domestic product (GDP) declined through the late 1990s even during an economic expansion. There has been a growing disconnect between the income reports to ...