For logistical reasons only? A case study of tax planning and corporate social responsibility reporting

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Critical Perspectives on Accounting journal homepage: www.elsevier.com/locate/cpa

For logistical reasons only? A case study of tax planning and corporate social responsibility reporting Matti Ylo¨nen a,b,1, Matias Laine c,* a

Department of Political and Economic Studies, University of Helsinki, Helsinki, Finland Aalto University School of Business, Department of Economics, Helsinki, Finland c School of Management, University of Tampere, FIN 33014, Finland b

A R T I C L E I N F O

A B S T R A C T

Article history: Received 27 June 2013 Received in revised form 8 December 2014 Accepted 9 December 2014 Available online xxx

The relationship between corporate taxation and corporate social responsibility (CSR) has become a much discussed topic in recent times. We offer insights into this debate by presenting a qualitative case study of the tax planning arrangements of one multinational company that uses transfer pricing to achieve significant tax savings. We contrast this arrangement with an analysis of how the company discussed taxation in its disclosures over a 10-year period, and set its arrangements against the CSR claims made by the company during this time. Despite its claimed commitment to accurate and transparent communication, the company has made only limited disclosures on taxation, and issues such as tax planning, tax risks and tax compliance have been omitted completely. By juxtaposing the legal tax planning arrangements of the company being studied with its lack of tax disclosures and apparent neglect of its own CSR commitments, we highlight how corporate taxation needs to be considered to be a CSR issue. Moreover, given that the disclosures of powerful social actors affect how issues such as corporate tax avoidance and responsible taxation are understood and subsequently acted upon in society, we consider it essential to analyse in detail what corporations actually say in their disclosures. ß 2014 Elsevier Ltd. All rights reserved.

Keywords: Tax avoidance Transfer pricing Corporate social responsibility Corporate social reporting

1. Introduction [Our] sales office is located in the Netherlands for its superior logistical location and proximity of our customers. . . (Stora Enso CCO, quoted in Talousela¨ma¨, 2012: 43).2 Tax planning has been an everyday practice in the business world for decades (Murphy, 2012; Sikka & Willmott, 2010) and multinational companies in particular now have a vast number of options for minimising their tax liabilities to nation states (OECD, 2013, 1998; Sikka & Hampton, 2005; Strange, 1999: 54). However, in an increasing number of situations the nature of tax planning arrangements is no longer entirely clear (e.g. KPMG, 2006). While the difference between tax

* Corresponding author. Tel.: +358 40 5368413. E-mail addresses: matti.v.ylonen@helsinki.fi (M. Ylo¨nen), matias.laine@uta.fi (M. Laine). 1 Tel.: +358 40 723 11 18. 2 The tax planning arrangement employed by Stora Enso Group in its internal pulp trade from Veracel, Brazil, to its paper mills in Finland has been described in the leading Finnish business weekly Talousela¨ma¨ (Fine´r, Laine, & Ylo¨nen, 2012). The study reported here elaborates substantially on the previous version: whereas the article published in Talousela¨ma¨ focused solely on the Veracel pulp trade, in the present study we analyse Stora Enso’s disclosures and combine this analysis with a broader discussion of tax planning and tax avoidance in multinational corporations. http://dx.doi.org/10.1016/j.cpa.2014.12.001 1045-2354/ß 2014 Elsevier Ltd. All rights reserved.

Please cite this article in press as: Ylo¨nen, M., & Laine, M. For logistical reasons only? A case study of tax planning and corporate social responsibility reporting. Crit Perspect Account (2015), http://dx.doi.org/10.1016/j.cpa.2014.12.001

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avoidance (usually referring to arrangements allowed by the law) and tax evasion (activities that break the law), is theoretically a clearly defined legal distinction, in practice this is something of a grey area, sparking debate about how corporate tax planning, avoidance, and evasion should be interpreted and understood (Christensen, 2011; Hasseldine & Morris, 2013; Leite, 2012; Sikka, 2013). Simultaneously, corporate social responsibility (hereafter CSR) has become a dominant feature of the contemporary business world, and today most multinational companies publish annual sustainability reports in which they emphasise their dedication to high ethical values and CSR (KPMG, 2011). It is evident, however, that CSR is an ambiguous concept and both its contents and subsequent implications are perceived differently by various sectors of society (see Joutsenvirta, 2011; Milne, Tregidga, & Walton, 2009). Similarly, in both the academic literature and the broader social debate, there are major disagreements with regard to whether corporate taxation should be considered an element of CSR or how the relationship between these two should be interpreted otherwise. In other words, there is an on-going discursive struggle around the interface of corporate taxation and CSR. Drawing on the tradition of discourse studies (Gergen, 1999; Phillips & Hardy, 2002), we maintain that the way in which powerful social actors (for instance, multinational corporations) discuss corporate tax avoidance, CSR and responsible taxation has an effect on how these issues are understood and, subsequently, are acted upon in society. Therefore, and given the contested nature of tax avoidance as a social issue, we consider it essential to analyse in detail what corporations actually say about taxation in their disclosures. Likewise, as connections between CSR and corporate taxation have attracted increasing attention in academic literature (Lanis & Richardson, in press; Muller & Kolk, in press; Preuss, 2012), there is also an appetite for studies that contrast the tax planning activities of corporations with their CSR disclosures (Boden, Killian, Mulligan, & Oats, 2010; Gray & Laughlin, 2012; Lanis & Richardson, 2013; Sikka, 2013, 2010). Moreover, given the lack of publicly available information on the taxation of individual corporations (Sikka & Willmott, 2010) and the acknowledged limitations of using financial databases to identify corporate tax shelters (Lisowsky, 2010), scholars have also proposed the use of creativity (Graham & Tucker, 2006) and ‘‘some other’’ data sources (Hanlon & Heitzman, 2010: 157) to provide information about corporate-tax-shelter activity.3 Accordingly, in this paper, we turn to qualitative research methods (Gendron, 2009; Patton, 1990) and offer a single case study (Yin, 2009) of Stora Enso Group (registered name: Stora Enso Oyj; hereafter ‘‘Stora Enso’’, ‘‘SE’’ or ‘‘the Group’’), one of the world’s leading pulp and paper companies. Stora Enso is renowned for its public commitment to sustainability and has been included regularly in indices such as the Dow Jones Sustainability Index and FTSE4Good. In broad terms, the aim of this paper is to use Stora Enso as a critical case (Patton, 1990) through which to offer insights into emerging discussions on the relationship between corporate tax avoidance, CSR and corporate disclosures. We seek to achieve this through the empirical juxtaposition of a transfer pricing-related tax avoidance scheme that Stora Enso has used in its internal pulp trade with the claims and commitments the company has made simultaneously in its CSR disclosures. In respect of case selection, it is proposed that a detailed investigation of Stora Enso presents a ‘‘critical case’’ (Patton, 1990) for discussing the relationship between corporate taxation, CSR and corporate disclosures. This selection is based on two key criteria. Firstly, information regarding the transfer pricing arrangement that Stora Enso employs in its internal pulp trade, from the Veracel pulp plant in Brazil to its paper mills in Northern Finland, is accessible to some extent; this is rarely the case for multinational organisations (Clausing, 2003; Swenson, 2001). Secondly, for years, Stora Enso has emphasised the importance of CSR for the organisation and has received external acclaim both for its CSR performance and for its approach to disclosure (see section 5.1.). As Patton (1990: 174) observes, critical cases are those that can ‘‘make the point dramatically’’, often characterised by the statement ‘‘if it happens there, it will happen anywhere’’. He also notes that picking a critical case is important if one can study only a single site, in which circumstance ‘‘it makes strategic sense to pick the site that would provide the most information and have the greatest impact on the development of knowledge’’ (ibid.). In this paper, we seek to elaborate on previous studies at both empirical and theoretical levels. Our empirical objective is to examine how multinational corporations use transfer pricing for tax avoidance. Even though the misuse of transfer pricing has frequently been identified as an important tool for tax avoidance (e.g. Richardson, Taylor, & Lanis, 2013), detailed scholarly accounts of how transfer pricing is used in intra-firm trade are virtually non-existent, probably because ‘‘corporate financial reports rarely provide any meaningful information about their transfer pricing practices’’ (Tang & Zhao, 2001, quoted in Sikka & Willmott, 2010: 353; see also Muller & Kolk, in press).4 We thus maintain that a detailed, longitudinal description of how Stora Enso, a multinational industry leader, uses transfer pricing arrangements for tax avoidance can be considered a ‘‘revelatory case’’ (Yin, 2009), highlighting in detail how transfer pricing – a phenomenon usually inaccessible to social science research at the level of the individual firm (Clausing, 2003: 2208; Swenson, 2001; but see ActionAid, 2010) – is used for tax avoidance in ‘‘the real world’’ (see Oats, 2012: 5; Boll, 2014).

3 OECD (2014) defines ‘‘tax shelter’’ as follows: (1) An opportunity to use, quite legitimately, a relief or exemption from tax to pay less tax than one might otherwise have to pay in respect of similar activities, or the deferment of tax; (2) The polite term usually given to a contrived scheme to avoid or reduce a liability to taxation. 4 The case studies usually referred to in academic articles focus either on tax avoidance using immaterial rights (e.g. Google, Apple, Microsoft, Starbucks) or on thin capitalization (e.g. SABMiller).

Please cite this article in press as: Ylo¨nen, M., & Laine, M. For logistical reasons only? A case study of tax planning and corporate social responsibility reporting. Crit Perspect Account (2015), http://dx.doi.org/10.1016/j.cpa.2014.12.001

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Following Yin (2009: 4), we argue that the use of a single case study is suitable for research projects that ‘‘seek to explain some present circumstance’’ and for elaboration of ‘‘how and why some social phenomenon works’’. It is therefore argued that the transfer pricing scheme used by Stora Enso is a ‘‘revelatory case’’ to be analysed and documented as ‘‘a phenomenon previously inaccessible to social science inquiry’’ (Yin, 2009: 49). In such instances, a ‘‘case study is worth conducting because the descriptive information alone will be revelatory’’ (ibid.). Furthermore, this case also provides an empirical level insight into the role of the Netherlands in the tax avoidance practices of multinational corporations. Many multinational corporations have one or more holding companies in the Netherlands because of the nation’s favourable tax regime (Weyzig, 2013: 72–73). Previous work has argued, nevertheless, that the Netherlands is not used for trade-related tax avoidance, a claim to which the case of Stora Enso provides a counter-example (Weyzig, 2013: 157). Our empirical investigation of the transfer pricing arrangement will then feed into our theoretical research objective, which is to contribute to the debate on whether or not corporate taxation should be considered an issue of CSR (e.g. Hasseldine & Morris, 2013; Preuss, 2012; Sikka, 2013). Whereas Hasseldine and Morris (2013) see taxation largely as a legal and technical question that has only a very limited role in CSR, Sikka (2013) perceives taxation to sit among broader sociopolitical questions of ethics, social power and state sovereignty, and hence argues that taxation should be considered to be at the very core of the debate on CSR. To provide insights into this debate, we will juxtapose Stora Enso’s tax arrangement with its published disclosures on corporate taxation and with the CSR claims it has made in its disclosures and policy documents during the period 2002 to 2011 (see Lanis & Richardson, 2013; Sikka, 2010, 2013). Previous quantitative studies of the relationship between corporate taxation and CSR rhetoric (e.g. Lanis & Richardson, 2012, 2013) have focused more on the volume of CSR disclosures. We take a different approach and maintain that through a detailed qualitative analysis it is possible to examine more closely what the organisation is actually saying in its disclosures (Laine, 2010; Tregidga & Milne, 2006). We argue that this has relevance for how corporate taxation and tax avoidance are to be understood (Gergen, 1999; Phillips & Hardy, 2002) and, subsequently, acted upon (Dryzek, 1997) at a societal level, since the nature of tax avoidance is a contested topic and corporate disclosures are one component in the construction of social reality. We maintain that the highly reputed Stora Enso presents a critical case for this discussion. Moreover, an examination of Stora Enso also responds to call by Hasseldine and Morris (2013) for detailed studies of corporations that have not been convicted of fraud or deception (see also ActionAid, 2010). Through our case study, we identify legal tax-planning practices that are problematic from the perspective of CSR. We argue, therefore, that taxation needs to be considered an issue of corporate responsibility and that there is a need for academic discussion on the associated implications for power relations between states, corporations and citizens. Finally, we will also use our empirical investigation to highlight how qualitative and interpretive studies can be used to engage in critical research on corporate taxation and to explore the implications that different discourses around corporate taxation have on capitalism and its power relations and connections with issues of social justice (see Boden et al., 2010; Gray & Laughlin, 2012; Hasseldine & Morris, 2013; Sikka, 2013, 2010). The paper proceeds as follows. The next section reviews previous research on corporate taxation, CSR and corporate disclosures. Section 3 presents an overview of the case company and discusses the data and methods that we have used here. Section 4 looks at the company’s tax planning arrangements in detail. Thereafter, Section 5 analyses Stora Enso’s disclosures on taxation and contrasts the aforementioned transfer pricing arrangements with the company’s CSR disclosures and policy documents. The penultimate section discusses our findings and the final section presents conclusions. 2. Taxation and corporate social responsibility 2.1. Corporate taxation and tax issues: introduction and definitions There is a substantial body of academic literature discussing corporate taxation, tax behaviour, and tax avoidance from various perspectives (see Hanlon & Heitzman, 2010). Questions of tax optimisation and compliance have been widely discussed in the positivistic accounting research tradition, as for instance in relation to capital markets, managerial incentives, ownership structures, and shareholder value (e.g. Chen, Chen, Cheng, & Shevlin, 2010; Desai & Dharmapala, 2006; Dyreng, Hanlon, & Maydew, 2008; Graham & Tucker, 2006; Lisowsky, 2010; Wilson, 2009). In similar vein, the ethical dimensions of corporate taxation and the attitudes of accountants and tax professionals towards tax planning, tax avoidance and tax havens have been closely explored (Christensen, 2011; Cruz, Shafer, & Strawser, 2000; Hansen, Crosser, & Laufer, 1992; Mehafdi, 2000; Shafer & Simmons, 2011). It has nevertheless been argued that the interplay between tax avoidance and CSR has only recently begun to receive due scholarly attention (Freedman, 2004; Huseynov & Klamm, 2012; Preuss, 2012; Sikka, 2010). Much of this more recent work has focused on the association between CSR performance and corporate tax behaviour (e.g. Lanis & Richardson, in press, 2012; Muller & Kolk, in press), on the scale of tax avoidance-related phenomena (e.g. Clausing, 2003; Maffini, 2009; Pak, 2007), and on debating whether or not tax planning and tax avoidance should be seen as issues of CSR (e.g. Avi-Yonah, 2009; Hasseldine & Morris, 2013; McGee, 2010; Preuss, 2012; Sikka, 2010, 2013). It has further been argued that the accounting literature offers only a limited range of critical work exploring the various social implications of corporate tax behaviour. As pointed out by the guest editors in a special issue of Critical Perspectives on Accounting on ‘Critical perspectives on taxation’, more critical research on taxation would have ‘‘important consequences for our understanding of globalization, social justice and state power’’ (Boden et al., 2010: 544; see also Gray & Laughlin, 2012).

Please cite this article in press as: Ylo¨nen, M., & Laine, M. For logistical reasons only? A case study of tax planning and corporate social responsibility reporting. Crit Perspect Account (2015), http://dx.doi.org/10.1016/j.cpa.2014.12.001

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The present case study seeks to address these issues, with a particular focus on transfer pricing-related tax avoidance. Misuse of transfer pricing has been identified as a major reason for erosion of the tax base (Huizinga & Laeven, 2006; Pak, 2007; Richardson et al., 2013). Transfer pricing refers to the trade conducted between subsidiaries of a company. Virtually all countries require that companies adhere to OECD transfer pricing rules, as incorporated in bi-lateral tax treaties and national legislation. The cornerstone of OECD transfer pricing guidelines is the ‘‘arm’s length’’ principle, which determines that two related companies should trade with each other as if they were separate entities. This usually means that the prices used in intra-firm trade should be market-based; however, it is often difficult to determine the market-based price for a particular product, and all the more so with immaterial rights or services. In tandem with the inadequate powers of the tax authorities and the relatively minor sanctions for non-compliance, this ambiguity creates opportunities and incentives for misuse of transfer pricing for tax avoidance (Pak, 2007) – that is, adjustment of transfer prices enables a company to decide where to declare its profits and, by the same token, where (if at all) it will be taxed. The challenges inherent in transfer pricing are illustrated in a study by Ernst and Young (2010), which found that 60% of parent transnational corporations believed their transfer pricing policies for administrative or managerial services were vulnerable to Government audit, and about 50% believed that their pricing of technical services was also vulnerable. This can be taken to indicate either the overtly ambiguous nature of legislation or the spread of aggressive transfer pricing in large corporations. With regard to the latter, Richardson et al. (2013) used a hand-collected sample of Australian firms to discuss which kind of firms would be more likely to engage in aggressive transfer pricing. They reported that determining factors such as profitability, leverage, intangible assets, and multinationality were associated with aggressive transfer pricing. Subsidiaries registered in tax havens have also been found to be used in many cases for misuse of transfer pricing (Hines, 2005, see also Huizinga and Laeven, 2006; Maffini, 2009).5 Despite the scale of misuse of transfer pricing (Richardson et al., 2013), corporate secrecy and the lack of publicly available information has precluded scholarly work that might offer insights into the transfer pricing practices of individual corporations (Muller & Kolk, in press; Sikka & Willmott, 2010). Addressing this lacuna, the present qualitative case study seeks to provide a more detailed ‘‘real world’’ (Oats, 2012: 5; see Boll, 2014) account of how a corporation engages in tax avoidance through transfer pricing. By way of context, the relationship between corporate taxation, CSR, and corporate disclosures will be now be discussed in more detail. 2.2. Taxes and CSR The relationship between tax avoidance and CSR is contested territory. Many jurisdictions offer corporations, organisations, and individuals various options for reducing their tax liabilities elsewhere. However, during recent years there has been intense public debate on whether corporations have the right to use all legally available means to minimise their taxes (ActionAid, 2010; Christensen, 2011; Guardian, 2007; KPMG, 2006). The issue is compounded by the complexity of national and international tax law: despite the clear theoretical boundaries, there is in practice a large grey area between illegal tax evasion and legal tax avoidance (Christensen, 2011; Leite, 2012). For present purposes, it is argued that the question boils down to complex questions of ethics, morality, and social responsibility. A couple of recent Finnish examples serve well to exemplify the contested nature of tax avoidance. In 2011, the Finnish newspaper Keskisuomalainen documented a thin capitalisation-related tax avoidance strategy employed by Mehila¨inen, a leading health care firm (Keskisuomalainen, 2011). In the following year, Mehila¨inen claimed to change its practice, even though their CEO emphasised that their activities had been ethical throughout and in full accordance with the law (Taloussanomat, 2012). More recently, the Finnish NGO Finnwatch published a research report on the tax avoidance practices of large Finnish-listed corporations (Finnwatch, 2014). The report suggested that leading Finnish multinationals have multiple subsidiaries in various tax havens and other low-tax jurisdictions, but this interpretation did not go uncontested. The Confederation of Finnish Industries, the country’s biggest business interest group, strongly challenged these claims and argued that Finnish corporations are responsible taxpayers who obey the law in all their tax-related practices. In both of these examples, the way in which concepts such as corporate taxation, tax avoidance, and responsible taxation were framed and constructed by the parties differed considerably. Similar developments can be identified across the globe. An NGO report and campaign in respect of tax avoidance by SABMiller in a number of African countries led the African Tax Adminstration Forum to launch their first ever joint investigation (ActionAid, 2011). In the US, a congressional inquiry into the tax avoidance practices of Apple attracted considerable public attention (US Senate, 2013). And in the UK, the negative public reaction following media reports of tax avoidance practices by companies like Starbucks again demonstrated that various social groups differ in their understanding of what kinds of tax behaviour should be considered appropriate. Corporations commonly insist that their tax practices have been within the boundaries of the law even as public discourse questions whether those same practices are acceptable, just, or socially responsible. In this regard, Dowling (in press: 7) has observed that ‘‘within the business community there is resistance to framing corporate tax and its avoidance as a moral issue’’.

5 According to the OECD definition, tax havens are jurisdictions that (a) impose no or nominal taxes for non-residents; other typical factors include (b) laws or administrative practices which prevent the effective exchange of relevant information with other governments; (c) lack of transparency; and (d) the absence of a requirement that the activity be substantial (OECD, 1998: 22–23).

Please cite this article in press as: Ylo¨nen, M., & Laine, M. For logistical reasons only? A case study of tax planning and corporate social responsibility reporting. Crit Perspect Account (2015), http://dx.doi.org/10.1016/j.cpa.2014.12.001

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Taxation is an essential social function, and scholars have interrogated the relationship between tax avoidance and CSR from differing theoretical perspectives. Avi-Yonah (2009), for instance, argues that the responsibility to pay taxes can be derived from each of the three main theoretical views of the corporation. He argues that the responsibility to pay taxes can in the first instance be reconciled with the ‘‘artificial entity’’ view, in which corporations are seen essentially as creatures of the state, and should therefore contribute part of their profits to the state in the form of taxes. Similarly, tax liability is compatible with the ‘‘real entity’’ view, in which corporations are viewed as being similar to individuals. On this view, CSR is not legally required but it is commended and to be encouraged. Finally, the ‘‘aggregate’’ or ‘‘nexus of contract’’ view sees CSR as an illegitimate attempt by managers to tax shareholders without their consent. However, according to Avi-Yonah, payment of taxes is a reasonable requirement even under this Friedmanian view of corporations. This follows logically from the fact that, in the absence of CSR, all social responsibilities devolve on the state. In like manner, the economic thinking behind the nexus model is that (minimal) state expenditures should be financed through taxation; if corporations did not pay taxes, the very infrastructure they are dependent on would be jeopardised. Related to the argument put forward by Avi-Yonah (2009), Preuss (2012: 4) has argued that ‘‘tax havens are very likely. . .a violation of the social contract between business and society’’, and that ‘‘all three major normative ethical theories identified serious to insurmountable concerns over the operation of tax havens’’. His conclusion is that ‘‘from a normative perspective. . .there is a conceptual flaw in any suggestion that a company that uses tax havens might be socially responsible.’’ A somewhat different conclusion is offered by Dowling (in press) who, in discussing the contested nature of tax avoidance, uses four perspectives to examine the question of whether tax avoidance is socially irresponsible. These include ethical, socioeconomic, political, and principle-based perspectives. Although Dowling discusses each of these perspectives only briefly, the paper still provides a useful summary of the arguments that can be made from different theoretical perspectives. In essence, Dowling argues that a convincing case can often be made both for and against the irresponsibility of tax avoidance. To further illustrate the contested nature of corporate taxation and tax avoidance, the recent debate between Hasseldine and Morris (2013) and Sikka (2013, 2010) – which also highlights some underlying ideological questions – will now be considered. For some years, Prem Sikka has sought to highlight both the damaging impacts of corporate tax avoidance and the role of major accountancy companies in this regard (Sikka, 2010, 2013, 2008; Sikka & Hampton, 2005; Sikka & Willmott, 2010). In a nutshell, Sikka argues that tax planning schemes resulting in tax avoidance and/or tax evasion are not merely technical issues arising between organisations and state authorities. In respect of the immediate issue of transfer pricing, Sikka and Willmott (2010: 353) have maintained that ‘‘research into politics of transfer pricing presents considerable opportunities for illuminating capital flight, tax avoidance, complexities of globalization and the deepening crisis of the state’’, and that the ‘‘use of transfer pricing to avoid taxes poses challenges to professional and corporate claims of acting as socially responsible organizations’’. More recently, Hasseldine and Morris (2013) have strongly critiqued Sikka’s reasoning, focusing in particular on the view expressed in Sikka (2010), in which he questions the CSR claims made by certain corporations in light of their tax planning schemes as revealed through legal actions and media coverage. Hasseldine and Morris (2013) argue, for instance, that Sikka (2010) confines his attention to a few fraudulent examples and conflates the concepts of tax evasion and tax avoidance, leading to unjustified criticism of the taxation practices and CSR claims of business as a whole. In addition, Hasseldine and Morris identify three factors that they find ‘‘relevant to understanding the relationship between CSR behaviour, corporate CSR reporting and decisions that are tax-related’’ (Hasseldine & Morris, 2013: 6). These factors are the intention of the actor, knowledge or appreciation of how the tax code applies to the events being considered, and the propensity of the actor to comply with the tax code and, in so doing, to make full and truthful disclosure of all tax-relevant matters associated with the event. By way of response, Sikka (2013) reiterates his position and questions the view taken by Hasseldine and Morris. In essence, whereas Sikka positions taxation within broader socio-political questions of ethics, power and authority, Hasseldine and Morris take a more legalistic position in which they see taxation as an essentially technical matter, rather than in terms of social power. It follows from this fundamental disparity of perspectives that there is no consensus on how much corporate tax should properly be paid in relation to the statutory corporate tax rates of particular countries. For present purposes, it is accepted that corporate taxation and the relationship between tax avoidance and CSR can be approached from differing perspectives. Nevertheless, in line with Avi-Yonah (2009), Preuss (2012) and Sikka (2010), it is the view of the present authors that corporate tax avoidance is an essential element of CSR. This position is echoed in the current definition of CSR by the European Union, which states that CSR is ‘‘the responsibility of enterprises for their impacts on society’’, in contrast to an earlier definition framing CSR more narrowly in terms of the environmental and social impacts of the corporation (European Commission 2011: 3, 6). In particular, drawing on Sikka (2010), it is argued that issues relating to tax avoidance are not merely technical but link directly to political issues such as power and state sovereignty (see also Boden et al., 2010). Further, Sikka (2013: 2) calls for ‘‘public exposure of the gaps between an organization’s talk and its action, or its internal culture compared to its public statements’’, noting that ‘‘there is a constant need to (re)position organisations in relation to the perceptions of society at large and to incessant talk about subscribing to social norms, fairness and codes of ethics in attempts to win over sceptical audiences’’. Attention now turns to a more detailed exploration of these issues. 2.3. CSR reporting and taxation In developing this argument, any discussion of the relevance of corporate disclosures necessarily leads on to consideration of the role of language in society. The present study takes the view that, rather than merely reflecting some

Please cite this article in press as: Ylo¨nen, M., & Laine, M. For logistical reasons only? A case study of tax planning and corporate social responsibility reporting. Crit Perspect Account (2015), http://dx.doi.org/10.1016/j.cpa.2014.12.001

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underlying reality, language has an active role in the framing and construction of concepts and social practices in social reality (Berger & Luckmann, 1967; Gergen, 1999; Phillips & Hardy, 2002). Furthermore, the view is taken that the varying use of language at different levels of society affects and influences the way people see and understand issues and phenomena. Following Dryzek (1997) it is further argued that communication does not take place in isolation, but that the ways in which language is used will simultaneously and subsequently affect how people act in respect of any given issue. As multinational corporations are powerful and highly visible actors in society, how these entities communicate in their disclosures and public statements has relevance for the construction and development of social reality. Previous research on increased CSR reporting has highlighted the broader political implications of this discourse in reinforcing particular actions and ways of seeing as legitimate and beneficial for the whole society (Archel, Husillos, & Spence, 2011; Milne et al., 2009). By analogy, it is suggested that corporate communication of taxation has implications for how corporate taxation is framed in society. The increasing scholarly interest in the relationship between corporate taxation and CSR has seen a parallel emergence of research relating to CSR reporting and taxation. These mainly quantitative studies have to date produced somewhat mixed results. In their sampling of Australian-listed firms, Lanis and Richardson (2013) found that tax-aggressive companies published more CSR disclosures than a matched sample of non-aggressive organisations. They argued that this phenomenon can be explained by corporate concerns about perceived legitimacy, since ‘‘tax aggressiveness is a strategy that is incompatible with [the] community expectations of corporations’’ (Lanis & Richardson, 2013: 76). However, in an earlier study, Lanis and Richardson (2012) used a sample of 408 listed Australian companies and found that higher levels of CSR disclosure were linked to lower levels of corporate tax-aggressiveness. Interestingly, from this finding the authors inferred that more socially responsible corporations were likely to be less tax-aggressive. Similarly, in a recent paper Davis, Guenther, Krull, and Williams (2013) studied the relationship between corporate accountability reporting and effective tax rates (ETR) for a sample of US corporations. Using CSR information from the MSCI database, they reported that both the CSR index they used and their own measure of CSR report quality were negatively related to 5-year cash effective tax rates. In their view, these findings suggest that corporate taxes are not seen by managers and corporate stakeholders to be an important element of corporate CSR behaviour. In acknowledging the contribution of this prior research to a certain understanding of the relationships between corporate characteristics, their tax behaviour, and levels of corporate social responsibility reporting, it is nonetheless argued here that such studies tend to remain at an aggregate level that yields only limited insights regarding such questions as power, state authority, and social justice (see Boden et al., 2010; Sikka, 2010). It is proposed that qualitative methods can supply grounding insights for such discussions, although it is acknowledged that qualitative work exploring corporate disclosures on taxation and its interlinkages with CSR remains a rarity. One recent exception is the study by Preuss (2012), in which he explored how organisations based in tax havens make use of formal CSR tools. In an earlier paper Preuss (2010) has shown how organisations based in tax havens make dubious claims of socially responsible behaviour in their codes of conduct. Preuss suggests that such practices may in the long run undermine the very idea of CSR. Together with Sikka (2010), this work offers preliminary indications of the possible gaps between corporate communication and action in relation to tax avoidance and CSR. These studies have not, however, been able to contrast actual tax avoidance arrangements with detailed longitudinal analysis of a corporation’s CSR claims. It is argued that the present case study yields significant insights in this regard. To summarise the argument so far presented, it is suggested that corporate tax payment is an issue of CSR (Avi-Yonah, 2009; Dowling, 2014; Preuss, 2012). Further to this, it is argued that tax avoidance and corporate tax strategies are political questions with important linkages to issues of power (Boden et al., 2010; Sikka, 2013, 2010). As the role of transfer pricing in international tax avoidance is significant (Richardson et al., 2013; Sikka & Willmott, 2010), and as there is a paucity of prior knowledge, it is considered paramount to explore in detail the transfer pricing arrangements of multinational corporations. Moreover, it is argued that the perceived significance of corporate tax avoidance and its relation to corporate social responsibility are contested issues in current social discourse. Given the role of language in constructing social reality and the significant power wielded by corporate actors, it is suggested that corporate disclosures and published policy documents are one medium through which the (re)construction and (re)framing of phenomena such as tax avoidance take place (see Tregidga & Milne, 2006). By selecting Stora Enso as the case organisation, a revelatory case of real life misuse of transfer pricing can be contrasted with an analysis of what an organisation is actually saying in its publicly acclaimed CSR disclosures. It is argued that this critical case (Patton, 1990) directs attention to some crucial challenges that public exposure of tax avoidance mechanisms creates for companies’ CSR reports. Simultaneously, the longitudinal perspective provided by our case study also highlights the implications CSR has on defining the boundaries between justifiable and questionable forms of tax planning (see Hasseldine & Morris, 2013; Sikka, 2010). The case will now be discussed in more detail. 3. Case setting, data, and method 3.1. Stora Enso and Veracel pulp trade This section presents an account of how Stora Enso achieved significant tax savings by using its Dutch subsidiary Stora Enso Amsterdam B.V. (hereafter SEA) in its Veracel pulp trade. Before the analysis, however, it will be useful to briefly describe the case setting and to present the data and methods used in this study.

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Formed through the merger of Finnish Enso and Swedish STORA at the end of 1998, Stora Enso is one of the world’s largest forestry and pulp companies, with total sales in 2011 of 11 billion euros. Stora Enso is publicly listed and employs some 30,000 people in more than 35 countries worldwide. While the company’s industrial base is in Europe (principally in Sweden and Finland) its strategic focus for growth since the end of the 1990s has been on emerging markets, especially in Brazil, China, and Uruguay. Indeed, Latin America has become the cornerstone of Stora Enso’s strategy of building growth on lowcost pulp from tree plantations (SE Annual Report, 2009). The Veracel mill is an integral part of this strategy. Veracel Cellulose is an integrated forest products company based in southern Bahia, Brazil. Stora Enso jointly owns Veracel with Brazilian Fibria Celulose S.A. The two owners are each entitled to one half of the pulp output, production of which commenced in 2005 and which currently amounts to some 1.1 million metric tonnes of bleached eucalyptus kraft pulp per year (SE Annual Report, 2009; Fibria Sustainability Report 2005). At the time of its opening, Veracel was the world’s largest pulp mill, representing a total investment of 1.2 billion dollars (SE Annual Report, 2006). Fig. 1 sets out the relevant ownership structures. Stora Enso Amsterdam B.V. is a small subsidiary that has become the functional centre of Stora Enso’s tax planning arrangements in the Veracel pulp trade. Inherited from the Swedish STORA in the 1998 merger, SEA was used as a holding company fully owned by Stora Enso Treasury Stockholm AB, an intra-group financing company – a typical arrangement for multinational corporations. The sole owner of Stora Enso Treasury Stockholm AB is the parent company Stora Enso. More detail about SEA follows in Section 4. 3.2. Data and methodology The study draws on the qualitative research tradition to explore the connections between tax planning and corporate social responsibility disclosures. Following Be´dard and Gendron (2004: 202), it is argued that ‘‘qualitative research often is the most effective method to conduct empirical investigations aimed at better understanding phenomena occurring in their natural context’’. Moreover, taking due account of limitations on the availability of data on corporate tax avoidance practices (Lisowsky, 2010; Sikka & Willmott, 2010; Wilson, 2009), it is considered useful to employ a qualitative approach to illustrate the inherent complexities of these organisational practices. In the present study we are to a large extent able to tackle the usual data limitations as the information on Stora Enso’s Veracel pulp trade is to some extent accessible. Stora Enso routes its Veracel pulp via the Netherlands, from which information about international trade statistics and Stora Enso’s subsidiaries can be obtained, in direct contrast to the kind of secrecy prevailing in jurisdictions such as the British Virgin Islands, the Cayman Islands, or the Bahamas (US Senate, 2006: 15; Weyzig, 2013: 72). Furthermore, under this transfer pricing arrangement, Stora Enso has utilised a holding company with no trading activities other than the Veracel pulp trade, making it possible to calculate the profits arising from the differences in transfer prices to and from this holding company. We will begin our empirical work by analyzing how Stora Enso employs transfer pricing to avoid taxes in its internal pulp trade. This investigation is built on an analysis of available documentary sources. Since Stora Enso gives extremely limited information about how it organises the internal pulp trade from the Veracel Plant to its mills in northern Europe, the description presented here is constructed from a variety of company-produced sources available in the public domain, supplemented by other public documents (Appendix 1). The use of multiple sources of evidence corroborates the findings of a [(Fig._1)TD$IG] single case study, thereby enhancing the plausibility of explanations provided (Patton, 1990; Yin, 2009).

Fig. 1. Ownership structures of case study setting.

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Description of the transfer pricing arrangement is based on a number of datasets. To begin, all publicly available reports were obtained in relation to the Veracel pulp trade participants, SEA and Stora Enso. As the Veracel operation started in 2005, these reports were collected from 2004 onwards. In addition to information on SEA, a second source was the broad range of financial statements published by other Stora Enso subsidiaries domiciled in the Netherlands. These were necessary for clarification of the organisation’s activities. Not all the reports from these entities were collected because a selected sample was sufficient to rule out rival interpretations of the pulp trade (Patton, 1990). As the annual reports do not always contain a full version of the financial statements, the official financial statements were obtained from the Finnish Trade registry and the Dutch Chamber of Commerce, Kamer von Koophandel. Next, further information published by Stora Enso was collected, including various presentation outlines and transcripts of investor telephone calls. These sources supplemented the information found in the financial reports and provided important details regarding the pulp trade. Articles about the organisation’s operations and published interviews with its management served as further supplementary information. It must be noted, however, that no plausible narrative of the transfer pricing arrangement could have been provided based solely on the material published by Stora Enso. The analysis was therefore supplemented with various public records, including custom records on exports and imports, harbour statistics and international trade statistics. Such aggregate figures proved useful for the analysis, as Stora Enso is the only organisation currently exporting substantial quantities of pulp from Brazil to Finland. These various data sources were used to track the pulp trade routes and to rule out competing explanations (see ActionAid, 2010). Analytically, the description presented here was arrived at through multiple rounds of iterative explanation-building, during which plausible interpretations were sought and rival explanations refuted (Yin, 2009). After presenting the transfer pricing arrangement, we turn to analysing Stora Enso’s disclosures and policy documents, and on contrasting them with the aforementioned transfer pricing arrangement. This analysis is based solely on material published by the Group over the 10-year period from 2002 to 2011. The starting point was to collect all Stora Enso’s annual reports and corporate sustainability reports for the period in question. In addition, a range of policy documents published by the organisation during the same period were gathered and analysed. In essence, everything was collected that might be of any relevance from a CSR or a taxation perspective. This included documents such as Stora Enso’s Business Practice Policy, Code of Conduct, Financial Code of Ethics, Corporate Governance Statement, and Corporate Social Responsibility Policy (Appendix 1). Current versions of these documents are available on the Stora Enso website. The Wayback Machine website6 was also utilised to access policy documents that were published since 2001 but had since been replaced. Disclosures made on the corporate website have not been analysed because the longitudinal set of CSR and annual reports, together with the numerous policy documents, already forms a sufficiently solid base on which to propose a coherent interpretation. In any event, the chosen 10-year period gives a longitudinal view of the disclosures and makes it hence possible to identify their development over the use of the SEA transfer pricing arrangement. Close reading (Tregidga & Milne, 2006; Laine, 2010) was used to analyse Stora Enso’s disclosures. The publications and related documents have all been read through and independently analysed by the authors. It is acknowledged that such an interpretive approach necessarily entails some degree of subjectivity; to improve the reliability of the analysis both authors first analysed the documents independently before any interpretations were shared within the research group. The Adobe Acrobat search function was utilised to ensure that all relevant passages were found. Searches were conducted using the key words ‘tax’, ‘taxation’, ‘responsibility’, ‘ethics’, ‘Amsterdam’ and ‘Veracel’. After both authors had made their own interpretations of each corporate communication, further discussions sought to establish a shared understanding, which is outlined next.

4. Analysis of the tax planning arrangements This section presents an analysis of how Stora Enso has avoided payment of a significant amount of tax by use of transfer pricing arrangements in its Veracel pulp trade. In transferring the eucalyptus pulp, Stora Enso used its Dutch subsidiary, Stora Enso Amsterdam B.V., to route the trade from its associated company Veracel in Brazil to its paper mills in northern Europe (Fig. 2). In brief, Stora Enso arranged its intra-organisational pulp trade so that profits derived from the low-cost pulp were accounted for by its subsidiary in the Netherlands where, due to tax differentials, reduced tax was payable. An account is presented below of how this is made possible by Finnish and Dutch tax laws and bilateral tax treaties. 4.1. The role of Stora Enso Amsterdam B.V. as the intermediary company The Company acts as a holding and finance company for its group companies. In addition, Stora Enso Amsterdam B.V. purchases pulp/cellulose from associated company Veracel Celulose S.A. and sells this to Stora Enso mills in Europe and China. (SEA Annual Report 2006: 8).

6

www.archive.org.

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Fig. 2. Overview of Veracel pulp trade.

As the Veracel trade began in 2005, the former holding company SEA was assigned a new role as the intermediary company for invoicing the pulp trade from Brazil to Stora Enso’s paper mills in Finland, China, and Germany. SEA has acted as no more than a booking centre in this pulp trade as the pulp from Brazil is shipped via Antwerp and subsequently Zeebrugge, both located in Belgium. In other words, while SEA handles the Veracel pulp trade, the pulp shipments never physically enter Netherlands. This is made possible under the EU principle of free movement of goods, services, and capital. The annual volume of pulp trade has been substantial, which also shows in SEA’s financial statements. From 2006 onwards, SEA sales amounted to at least 150 million euros annually, peaking at over 250 million euros in 2008. Stora Enso documents, Finnish customs statistics, and Port of Oulu annual reports indicate that some 60–70% of the Veracel pulp traded via SEA was shipped to Oulu between 2005 and 2010,7 generating considerable profits for SEA. By the end of 2010, SEA’s total earnings from this trade since its initiation in 2005 were 297 million euros. The average profit margin for the period was 27 percent. During the same period, the total profits of Stora Enso amounted to less than 600 million euros. With only a few employees, SEA thus generated half of the Group’s profits, even though its turnover was less than two percent of the Group’s turnover. Out of these substantial profits, SEA paid very little tax. Despite some substantial fluctuation in its annual tax rates, the company paid only 4.5 million euros in taxes from its total profits during the period 2005–2010. This amounted to an effective average tax rate of only 1.5%, substantially below statutory tax rates in the Netherlands.8 Even though SEA is only one of Stora Enso subsidiaries, these figures show that it has been of crucial importance in Stora Enso’s business model and tax planning.9 4.2. Stora Enso Amsterdam B.V. from a tax law perspective The internal business model of SEA is based on buying pulp at a ‘‘discount’’ from Veracel and then selling it on to paper mills in other countries. As the former CFO of Stora Enso explained in his August 2005 presentation, ‘‘Stora Enso buys the pulp from Veracel according to the ‘cost plus’ method and invoices its mills at market price of pulp’’ (Ma¨kela¨inen, 2005: 24). This is further elaborated in the SEA reports: The goods purchased and the goods sold are related party transactions. All transactions with related parties are at arm’s length, except for the goods purchased for which a discount is received from the related party (SEA Annual Report 2008: 18). In the quote above, the company effectively admits that it uses SEA to shift profits, as the goods are purchased at ‘‘a discount’’ and sold at market prices. The Veracel pulp trade is SEA’s only trading activity. The ‘‘tax behaviour’’ (Lanis & Richardson, 2013) is, in other words, tailored to show profits in a jurisdiction where they will be taxed with a very low tax rate. This means that the use of SEA results in tax avoidance.

7 Our analysis of the pulp trade ends in the year 2010, as SEA’s annual report for 2011 had not been filed in the trade registry at time of writing (January 2013). 8 The Netherlands has a progressive, two-tier corporate income tax system, the lower rate applying to incomes up to 200,000 euros at 27% in 2005 (reduced to 20 percent in 2010), and the higher rate applying to income exceeding 200,000 euros at 31.5% in 2005 (reduced to 25.5% in 2010). The EU’s parent-subsidiary directive of 1990 removed taxation of a group’s internal dividends within the EU, which means that Stora Enso Group can transfer the profits generated in Amsterdam as untaxed dividends to the Finnish parent company. 9 It should be noted that measuring the exact amount of tax benefits is a very challenging task, as the financial statements do not provide the necessary information for such calculations (Hanlon and Heitzman, 2010). The use of effective tax rate, for instance, has been identified as a source of bias in analyses of corporate tax behaviour (Plesko, 2003). We acknowledge this critique but nevertheless maintain that, despite its shortcomings, the use of effective tax rate adequately serves our illustrative purpose in the current case, as we seek neither to present exact measures of tax benefits nor to conduct any statistical analysis of corporate activities. Moreover, it should be noted that Stora Enso Group has not questioned the use of ETR in this case (see Talousela¨ma¨, 2012). As noted by Yin (2009: 182–184), such a review by participants and informants improves the construct validity of a study.

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Juridical reasons for Stora Enso’s ability to avoid arm’s length prices in the Veracel trade can be traced to tax treaties between Brazil and Netherlands. With the triumph of the OECD Transfer Pricing Guidelines, the arm’s length principle has become the standard in international trade (Vega, 2012). This requires intra-group transactions to be priced as if the trading partners were two independent parties. It should be noted, as pointed out by Stora Enso (Talousela¨ma¨, 2012: 43), that Brazil is not an OECD member and is an exception to the norm here in not adhering to the Transfer Pricing Guidelines. Instead, Brazil gives companies the option to choose from a number of pricing methods combined with safe harbour rules. The cost plus method referred to above is one of these options. Even though Brazil does not follow the OECD arm’s length principle, it has incorporated the principle in its tax treaty with the Netherlands (Brazil-Netherlands Tax Convention, 1990). This appears to give Brazilian authorities the right to tax the trading profits derived from the Veracel trade at market prices. However, they are not obliged, nor do they appear willing, so to do. The lack of publicly available information limits further discussion of the matter; however, it seems likely that the tax incentives granted to the company by Brazil to secure the investment may be a relevant factor here.10 As already mentioned, the effective tax rate on the total profits of SEA during the period 2005 to 2010 was 1.5 percent, which is significantly lower than statutory tax rates in the Netherlands. Again, without more publicly available information, it is difficult to fully explain this tax rate. A partial explanation runs as follows: The profits are taxed according to the going tax rate in the Netherlands. Part of the profits is tax exempt because of legislation concerning hidden dividend distribution, part is taxed according to normal rates. (Stora Enso CCO in Talousela¨ma¨, 2012: 43) Another partial explanation is found in SEA annual reports, which explain that the company has negotiated two Advance Pricing Agreements (APAs) with the Netherlands: With regard to the pulp activities, Stora Enso Amsterdam B.V. concluded a determination agreement with the Dutch tax authorities. This agreement applies to the period January I, 2005 up to December 31, 2009. The tax charge is determined in accordance with this agreement. (SEA Annual Report 2008: 13) Profit tax is calculated in the profit/loss before taxation in the profit and loss account, taking into account any losses carried forward, tax exempt items, non-deductible expenses and the tax ruling relating to pulp activities concluded with the Dutch tax authorities for the period January 1, 2010 up to and including December 31, 2014. (SEA Annual Report 2010: 16) The tax rulings refer to APAs, the contents of which are not in the public domain. It is nonetheless clear that while APAs cannot set alternative tax rates since their purpose is to bring certainty to transfer prices utilised by the company, they can yet determine an alternative tax base, depending on the transaction (Tax Consultants International, 2012). Accordingly, a possible reason for the low effective tax rate might be that the tax base has been negotiated on the basis of average profits in the industry. It is safe to assume that on market-based prices a leading global pulp and paper company would not earn half its profits solely from pulp trade between one factory and its paper mills. It seems clear that Stora Enso has achieved considerable tax savings from the SEA arrangement. Based on the various documentary sources, including the annual reports of SEA, harbour records, and international trade statistics, it appears that in the period 2007 to 2008 approximately 60 to 70 percent of the Veracel pulp was bought by the Stora Enso mill in Oulu, northern Finland. Instead of routing the pulp via SEA, the Oulu mill could have bought the pulp directly from Veracel, and presumably at a cheaper price: SEA was, after all, merely a booking centre with no genuine activities apart from handling the money flows. There is no reason why this function could not have been assigned to the subsidiary in Oulu, Finland, making incomes also taxable in Finland. This interpretation is further validated (see Yin, 2009: 182–184) by the spokeperson of the company, who commented on the article revealing their tax arrangement as follows: ‘‘If [our Oulu mill] acquired pulp directly from Brazil, this would have tax consequences for Stora Enso’’ (Stora Enso CCO in Talousela¨ma¨, 2012: 43). If we assume that 60 percent of SEA’s total profit of 299 million euros would in this case have been returned in Finland, Stora Enso would ostensibly have had to pay 47 million euros of this in taxes at the Finnish corporate tax rate of 26 percent, as compared to the 1.5 percent actually paid (to the Netherlands). Granted that the exact figure is debatable,11 the figures themselves are very much a secondary concern for present purposes as the main aim is to contrast Stora Enso’s tax planning arrangements with its CSR disclosures.

10

See Veracel 2005 for further information on the tax incentives given in Brazil. We acknowledge that a direct comparison of an effective tax rate with theoretical tax duties payable on a statutory tax rate may be an inconsistent setting (see also footnote 9). We argue, nevertheless, that through the use of transfer pricing and its Dutch subsidiary, Stora Enso Group has avoided considerable tax duties. This is apparent also from the statement by Stora Enso’s CCO: ‘Stora Enso’s tax benefits from the 6-year period are in total under 10 million Euros, instead of the 47 million Euros as claimed by the article’ (Talousela¨ma¨, 2012: 43). The exact figure is debatable and perhaps not calculable, as the financial statements and figures can be interpreted differently. For instance, Stora Enso made no taxable profit in 2008–2010. Stora Enso’s CCO interprets this to mean that the company gained no tax benefits from the arrangement during those years. However, this holds only if the company made no taxable profits during the ten-year period 2008–2017. It seems quite obvious that there have, in fact, been more than just minor tax-related gains from the arrangement. 11

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Table 1 Appearance of word ‘‘tax’’ in annual reports of Stora Enso Group (excluding financial/accounting information). Context

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Taxes paid to states/benefits to societies Technical notes/Other Total mentions

0

0

0

1 1

0

1

1 1

1 1

1 1

1 1

5. Analysis of Stora Enso’s CSR disclosures 5.1. Stora Enso and responsibility in general Stora Enso was again named as one of the Ethisphere Institute’s World’s Most Ethical Companies for 2009. The World’s Most Ethical Companies are selected by the Ethisphere Institute, which is dedicated to the research, creation and sharing of best practices in ethics, compliance, and corporate governance. (SE Global Responsibility Report, 2010: 5.) This section looks to contrast the transfer pricing arrangement with the disclosures Stora Enso has made on taxation and the claims it has made on corporate social responsibility over the ten years from 2002 to 2011. The present findings illustrate how corporate tax avoidance strategies (in the form of SEA) can be at odds with widely acclaimed CSR reports, leading to a discrepancy that has not to date received appropriate coverage in the academic literature on CSR. Stora Enso has long emphasised its commitment to sustainability and social responsibility. The company started publishing environmental reports in the early 1990s; in the early 2000s these became ever broader social responsibility reports, from Corporate Social Responsibility Report in 2002, through Global Sustainability Report in the seven years from 2003 to 2009, to Global Responsibility Report thereafter (for previous work on Stora Enso’s reporting, see Joutsenvirta, 2011; Laine, 2010). Stora Enso has also spelled out its policies in relation to corporate communication and social responsibility in a number of other documents. The company published its first CSR Guidelines in 2001. In the same year, it also decided to support the United Nations’ Global Compact initiative and its (then) nine principles relating to human rights, labour, and the environment.12 In January and May of 2004, the CSR guidelines were augmented by the Stora Enso Financial Code of Ethics and the Group’s Information Policy. Stora Enso Guidelines for Corporate Governance was first published in May 2005 and revised in April 2012; Principles for Social Responsibility was revised in 2007; and 2008 saw publication of the Stora Enso Code of Conduct. Most recently, in July 2011, the company published its Business Practice Policy. Over the years, Stora Enso has also been awarded various certificates relating to sustainable wood production and CSR. Stora Enso’s work on responsibility has in many ways been considered a success, and the company has featured for some years in several well-regarded responsibility indices. In 2011, it received top scores in the paper and forest products industry in the Carbon Disclosure Project’s Nordic Carbon Disclosure Leadership Index for its reporting on carbon emissions, ranking among the top five companies overall. Stora Enso was the only European company from this sector listed in the Dow Jones Sustainability Indices for 2011–2012, and it led the basic materials sector for 2011 in the annual review of the Forest Footprint Disclosure. The company has also been included in the FTSE4Good Index Series since 2001.13 5.2. The (non-) presence of taxation in Stora Enso’s disclosures and policy documents [A]ll business transactions on behalf of Stora Enso must be reflected accurately and fairly in the accounts of the company (. . .) communication is based on credibility, responsibility, pro-activity and interaction. (SE Principles for CSR 2001: 2). The findings of a close reading of Stora Enso’s responsibility and financial reports are reported with a view to mapping out how Stora Enso has addressed tax issues across its various publications. Although the Veracel pulp trade was only initiated in mid-2005, a more comprehensive understanding of its development supports the assessment of how taxation is handled in Stora Enso’s disclosures for the 10-year period 2002–2011. These findings are presented in two parts: a discussion of Stora Enso’s annual and CSR reports, followed by an examination of its public policy documents. 5.2.1. Taxation in Stora Enso’s annual reports and CSR disclosures Stora Enso’s annual reports include the Group’s financial statements, in which taxes are referred to a few times in each year. This formal requirement is of limited relevance here, however, as it tells us very little about Stora Enso’s approach to taxation. Similarly, the annual reports make few references to tax that are not accounting-related (see Table 1). Chronologically, the first of these appears in the annual report for 2005, in which there is mention of ‘‘Wood markets in

12

See http://www.unglobalcompact.org/. It is simultaneously worth noting however that Stora Enso has over the years also attracted considerable criticism from several non-governmental organisations (see e.g. Kro¨ger & Nylund, 2012). 13

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Table 2 Appearance of word ‘‘tax’’ in CSR reports of Stora Enso Group. Context Environmental costs for the company Taxes paid to states/benefits to societies Technical notes/Other Total mentions

2002

2003

1 1

3 2 5

2004

2005

2006

2007

2 3

1 5

1 2

3

5

6

3

3

2008

2009

2010

2011

1

1 3

1 3

1

4

4

1 3 1 5

Northern Europe remain tense, with forest taxation change in Finland bringing an additional element of uncertainty’’ (Stora Enso Annual Report, 2005: 25). The 2008 report notes that the company’s CFO is responsible for risk management and taxes. In 2009, part of the annual report is written in a dialogue format; Mats Nordlander, then head of the company’s packaging business area, notes that ‘‘We would like people who read the negative media reports to keep in mind that our project benefits the vast majority of the local population – not only by providing jobs and tax income, but also by introducing modern sustainable forestry management thinking and practice’’ (SE Annual Report 2009: 22). It was not possible to locate any further mentions of tax in the annual reports, and it is noteworthy that issues such as tax planning, tax risks, and tax compliance have been completely omitted. A systematic analysis of Stora Enso’s CSR reports does not change this overall picture to any significant extent. As can be seen from Table 2, tax issues receive only sporadic attention in Stora Enso CSR disclosures. In 2002, the only mention of tax related to advice given to people made redundant from the company. In 2003, an explicit position was taken on paying taxes: ‘‘Stora Enso aims to be a responsible member of all the communities where the Group operates’’, and ‘‘generates welfare within these societies by paying wages and taxes’’ (SE CSR report 2003: 9). This was followed by an acknowledgement that ‘‘In many locations, Stora Enso’s mills are major employers and taxpayers, and this position entails a considerable responsibility’’ (SE CSR report 2003: 37). Both local and consolidated tax figures were seen to be relevant, as well as the money flows within the company: Stora Enso’s mills are often located in small communities, where they are major employers, taxpayers and significant business partners for many local enterprises. Understanding the relevance of the economic aspects of sustainability involves looking at local issues, and considering local realities. However, Group-level summaries of direct economic impacts can also give important information on how Stora Enso affects different stakeholders economically, and how the monetary flows behind its business operations are formed. (SE CSR report 2003: 41) This paragraph has appeared in almost identical form in several Stora Enso CSR reports (for the years 2004, 2007, 2009, 2010, and 2011). In like manner, disclosure of the aggregated taxes paid by Stora Enso to governments around the world has been a common feature of their CSR reports since 2004. In addition, these reports mentioned some individual tax-related issues. Stora Enso’s 2005 and 2006 sustainability reports highlight the fairly positive results given to Veracel in an assessment of the enterprise’s economic, social, and environmental impacts commissioned from the UNDP. The CSR report for 2008 was exceptional in that its only reference to tax related to environmental taxes. Finally, the report for 2011 is interesting because it portrays the decision to build a new plant in a tax-exempt free-trade zone as a socially responsible decision of some significance, stating that ‘‘Tax free zones are a common way to attract foreign investments and generate employment so as to reduce poverty and stimulate the economy’’. (SE Global Responsibility Report 2011: 20) As in the case of the annual reports, it is worth pointing out that over a 10-year period Stora Enso’s CSR disclosures made no reference to issues such as tax risks, tax planning, or tax compliance, nor have they included any country-level or regional analyses of the taxes paid by the company. 5.2.2. Taxation in Stora Enso’s published policy documents As mentioned above, Stora Enso has published numerous policy documents regarding corporate behaviour and CSR in addition to the annual disclosures. The 2001 publication Principles for Corporate Social Responsibility (quoted above) emphasised that communication needs to be responsible, accurate, and credible. The Financial Code of Ethics of 2004 strengthened an earlier commitment to transparency by demanding ‘‘full, fair, accurate, timely and understandable information in the Company’s public reports and other communications’’ (SE Financial Code of Ethics 2004: 1). Similarly, the group’s Information Policy from the same year notes that ‘‘The information policy of the Stora Enso emphasizes the importance of transparency, credibility, responsibility, proactivity and interaction’’ (SE Information Policy 2004: 1). Taxes are not explicitly mentioned in any of these documents. Again, the Guidelines on Corporate Governance introduced in 2005 focus on clarifying the responsibilities of different actors and bodies within the company, but without any reference to taxation; while the annual corporate governance reports produced since 2009 only mention tax as a responsibility of the Chief Financial Officer. Stora Enso revised its principles for social responsibility in 2007. Again, taxes were not mentioned despite the promise of compliance with ‘‘the principles of sustainable development, including social, environmental and economic aspects’’ (SE Principles for Social Responsibility 2007: 1). The document also reiterated an earlier commitment to ‘‘reflect our business transactions, openly, accurately and fairly in the accounts of the company’’, and reaffirmed the 2001 alignment with credible, responsible, proactive, and interactive communication. In 2008, Stora Enso published its Code of Conduct. By contrast with

Please cite this article in press as: Ylo¨nen, M., & Laine, M. For logistical reasons only? A case study of tax planning and corporate social responsibility reporting. Crit Perspect Account (2015), http://dx.doi.org/10.1016/j.cpa.2014.12.001

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the other shorter guidelines, it spanned some 32 pages – but yet again, the issue of tax went unmentioned. Committing to a belief in ‘‘fair and free trade’’ (SE Code of Conduct 2008: 3), the company asserted that ‘‘Obeying local laws and regulations is the most important thing we can do’’ (p. 4), and that ‘‘Everything our company writes or says, whether internal or external, must be honest, believable and responsible’’ (p. 8). The Code of Conduct also stressed compliance to laws and regulations, but few of the issues discussed in the document are relevant to taxation, and none are addressed in anything other than the general and indirect terms described. In general, this investigation confirms how Stora Enso has emphasised its commitment to transparency and responsible communication across a range of documents and policies – without availing of any of these multiple opportunities to publicly address taxation issues. Longitudinal analysis of Stora Enso’s disclosures over a 10-year period reveals very few disclosures on taxation, and none at all on tax planning. The few implicit references to tax as a responsibility issue stress the company’s role as a major taxpayer in ‘‘all of the communities where the Group operates’’ – a claim that is disingenuous to the point of dissemblance given that SEA generated roughly half of the Group’s profits in the Netherlands, where it has a negligible actual presence relating to the pulp trade. These findings concerning Stora Enso’s tax planning arrangements in respect of the Veracel pulp trade will now be explored in more detail.14 5.3. CSR policies, transparency commitments and the Veracel pulp trade The analysis in this subsection focuses on how the SEA transfer pricing arrangement aligns with the various policy statements and commitments Stora Enso has made over the 10-year period from 2002 to 2011. Stora Enso began to acquire pulp from the Veracel mill in 2005 when, as noted, it had already made clear commitments in respect of corporate responsibility: As an international company, Stora Enso acknowledges its role as a model company in the global, national and local society. Our attitude shall be characterised by respect for the cultures, customs and values of individuals and groups in countries where we operate. When developing our business to earn credibility, we will comply with and when necessary go beyond the requirements of national standards and legislation. (SE Sustainability Report 2003: 2.) In addition to general statements professing a high regard for social responsibility, the organisation highlighted its intention to comply with legislation across all of its activities. It was further asserted that openness and transparency would be given high value: Transparent interaction: In order to continuously strengthen our operations and develop environmental and social issues in a sustainable way, Stora Enso considers an open discussion and interaction with all stakeholders, both governmental and non-governmental, as fundamental. (SE Sustainability Report 2003: 2) Stora Enso is committed to sustainability – economic, environmental, and social responsibility underpins our thinking and our approach to every aspect of doing business. The Group builds accountability into its operations by being transparent and engaging in open dialogue with stakeholders. (SE Annual Report 2005: 2) In the somewhat ambivalent field of corporate sustainability, such commitments to transparency can be seen to be fulfilled solely by disclosure of social and environmental dimensions of corporate operations; but Stora Enso’s CSR policies also contained clear statements regarding how financial transactions should be reported – that is, transparently, fairly, and responsibly. It seems, however, that these declared commitments to openness and transparency do not extend to tax arrangements. As described, the pulp shipments from Veracel to Northern Europe have been routed through the books of SEA since their commencement in 2005. This is not mentioned in any annual or CSR reports and becomes evident only upon examination of SEA’s filed financial statements and other public records. Stora Enso gives no explanation for the SEA profit margin in any of its publications: in fact, SEA has never been mentioned in any of the accounts or disclosures relating to Veracel pulp. It is questionable whether Stora Enso has followed its own guidelines: ‘‘We reflect our business transactions openly, accurately and fairly in the accounts of the company.’’ (SE Principles for Social Responsibility 2007: 1), including ‘‘how the monetary flows behind . . . business operations are formed’’ (SE CSR 2003: 41). A closer look at the financial statements filed by SEA calls into further question the accuracy, fairness, and openness of Stora Enso’s disclosures. These financial statements seem odd, as they tend to begin with a discussion of pulp market developments in North America, Asia, and Europe – issues that bear very little relevance to SEA’s operations given that the subsidiary ‘‘purchases pulp/cellulose from [the] associated company Veracel Celulose S.A. and sells this to Stora Enso mills in Europe and China’’, and sales are ‘‘only made to inter-company customers’’ (SEA Financial statement 2006: 8). The SEA financial report for 2007, for example, discusses not only softwood and hardwood list prices but also supplier stock levels and

14 We would of course not expect Stora Enso or any other company to openly admit in their reports that they are avoiding taxes. However, it should be noted that representatives of Stora Enso have admitted in other forums that the SEA arrangement gives them tax savings, and that the transfer prices used in SEA trade do not reflect market-based prices – as can also be see from the financial reports of SEA. The CSR commitments, reporting, and reputation of Stora Enso are all in conflict with these facts.

Please cite this article in press as: Ylo¨nen, M., & Laine, M. For logistical reasons only? A case study of tax planning and corporate social responsibility reporting. Crit Perspect Account (2015), http://dx.doi.org/10.1016/j.cpa.2014.12.001

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currency trends among the Canadian Dollar, the US Dollar, and the Brazilian Real. Indeed, these narratives present as concerted attempts to divert attention away from the actual whereabouts of the organisation. The fact is that this small subsidiary generated major amounts of profit through its operations as an intra-firm trade centre, which only had one supplier and only a few internal customers. In broader terms, it may be concluded that Stora Enso does not seem to view corporate taxation as falling under the umbrella of corporate responsibility. As mentioned above, the organisation is keen to point out that it generates welfare by paying taxes and lists the various economic impacts its activities have for various levels of society; yet it has proved impossible to identify any disclosure that the organisation practises tax planning. Furthermore, the activities of SEA can readily be seen to fall into the grey area of taxation between avoidance and evasion. Before the Veracel pulp operations commenced, Stora Enso Group’s management was clearly aware of the existence of this domain of ambiguity: Being serious about your business ethics means looking into the grey areas of your business, and taking the appropriate action to stop inappropriate practice. (Deputy CEO Bjo¨rn Ha¨gglund in Stora Enso Annual Report 2002: 34). Even so, the SEA tax arrangement was employed until at least 2010. Furthermore, it seems clear that the top management of Stora Enso Group was well aware of this arrangement, as the CFO of Stora Enso (who has since left the Group) was also a member of the board of SEA throughout the period from 2005 to 2010.

6. Discussion There is an on-going discussion in societies regarding how corporate tax avoidance and optimisation should be interpreted, and how such tax activities relate to corporate social responsibility. In this paper, we have sought to engage in this debate by providing a single case study that juxtaposes a transfer pricing-related tax avoidance scheme employed by a leading multinational pulp and paper company, Stora Enso, with the corporation’s CSR commitments and tax-related disclosures. Given the paucity of information that is available publicly on the taxation of individual corporations (Sikka & Willmott, 2010), our empirical investigation serves as a revelatory case, demonstrating how multinational companies use transfer pricing for tax avoidance. Furthermore, our longitudinal analysis of Stora Enso’s disclosures shows that the company makes very few tax-related disclosures, despite its extensive CSR claims and ostensible wide commitment to transparency. As Stora Enso is acclaimed for its CSR reporting and features regularly on numerous sustainability indexes, we maintain that this empirical investigation provides a critical case (Patton, 1990) for the theoretical debate about whether corporate taxation should be considered an issue of corporate social responsibility. The study at hand answers calls by Hasseldine and Morris for research on tax-related behaviour ‘‘that is not considered to be deceitful, fraudulent or corrupt by democratically elected governments and authorities’’ (Hasseldine & Morris, 2013: 2), while fulfilling their definition of ‘‘ex ante choice [of tax behaviour] based on ignorance in combination with negligent disclosure’’ (p. 6), which they argue to be different from an ‘‘ex ante choice [of tax behaviour] based on diligently acquired knowledge in combination with full and truthful ex post disclosure’’. According to the criteria outlined by Hasseldine and Morris (2013: 6), ‘‘an intention to be fraudulent, deceitful and/or corrupt is a necessary condition for any behaviour to be classified as tax evasion, but it is not a characteristic of tax avoidance’’. Our case highlights how Stora Enso became deceitful in terms of its own declared commitment to transparency and responsibility by creating ‘‘gaps between an organization’s talk and its action’’ (Sikka, 2013: 2). We argue, therefore, that the relationship between CSR, taxes and disclosure is much more nuanced than the legislative perspective advanced by Hasseldine and Morris (2013). It is evident that extensive CSR reports and high rankings in CSR indices sometimes offer very little information about a company’s responsible behaviour or otherwise in terms of tax practices. Should the situation remain the same, there is a real danger that CSR reports, the legitimacy of which are already challenged, will become even less credible as tools for learning about corporations’ contributions to society (see Preuss, 2012). It seems clear that there are structural incentives for corporations to use tax arrangements that fall into the grey area between legal avoidance and illegal evasion because conduct such as that presented here escapes the attention of tax authorities quite easily. This alone provides sufficient reason to view payment of taxes as an issue of corporate responsibility which should be reported and discussed accordingly. Indeed, had the Veracel pulp trade taken place in a less developed country or between developing countries, the social responsibility element of the SEA case would have been accentuated further still (see ActionAid, 2010; Lewis, 2013). Moreover, the complexity of international corporate tax law, together with the structural power of multinational corporations and the highly developed and readily available nature of tax consultancy services, place the tax authorities at a considerable disadvantage, even in well-administered and well-resourced states such as Finland. In other words, the SEA case demonstrates that it is very difficult, even for highly developed states, to dispute arrangements that multinational corporations, motivated by the imperative of profit maximisation, clearly adopt in order to reduce tax payments.15 Referring to the broader issue of global development, Christensen (2011: 179) has gone as far as to

15 While there are hundreds of active domestic and foreign multinational corporations in Finland, the transfer pricing group of the Large Tax Payer Office has just thirty inspectors – more than in most European countries, though only after the number was augmented from fewer than ten inspectors in 2012 (Fine´r, 2012). Though it appears unlikely, we cannot say for certain whether tax authorities have examined the SEA arrangement, as in Finland such investigations are (also) not in the public domain and possible court decisions are published with anonymity protections for business ahead of decisions.

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characterise ‘‘the global infrastructure of tax havens, banks, legal and accounting businesses, and related financial intermediaries in providing an offshore interface between the illicit and the licit economies’’ as the ‘‘elephant in the living room of the development debate’’. The absence of taxation from corporate disclosures (see Davis et al., 2013) suggests that taxation is taboo; a matter on which businesses are not supposed to communicate openly. Alternatively, Stora Enso Group’s silence on tax planning can be interpreted as implying that the corporation is aware of the sensitivity of this issue for society at large. In fact, it can be argued that it serves the interests of business organisations to treat taxation and CSR as entirely separate domains. Not only does the considerable expertise required to understand international corporate taxation provide (superficial) legitimate cover for the continuation of the status quo – making fewer demands on company resources – but also much of the information regarding business transactions is kept out of the public domain, conveniently, enabling continued and extended utilisation of the grey area for tax management. Furthermore, as pointed out by Dowling (2014), businesses have resisted discussion of taxation as a moral issue. The present investigation of Stora Enso’s published documents has not only highlighted the absence of tax-related disclosures but has also shown how the company appears to position taxation outside the sphere of corporate responsibility. We argue that such a framing of taxation can also influence the way taxation is discussed, understood and, subsequently, acted upon in societies (see Gergen, 1999; Milne et al., 2009; Tregidga & Milne, 2006). Further analysis of similar practices within other major corporations would underline this contention (see Preuss, 2012; Davis et al., 2013). It should be noted that companies and policy makers have already begun to look further into some of the questions and issues advanced here, even though some of the suggested solutions seem to be more akin to window-dressing exercises than genuine attempts for wider transparency. Companies such as PwC and Vodafone – both of whom have attracted negative publicity in tax-related disputes – have started to report and discuss their tax affairs beyond the requirements of the accounting regulations for corporations. For several years, PwC has been developing its Total Tax Framework, which offers companies the tools to list and elaborate on several types of paid and collected taxes (PwC, 2014). Vodafone has applied a similar approach in reporting its contributions publicly (Vodafone, 2014) and some other companies have also begun to discuss tax payments in their CSR reports (Finnwatch, 2014). A typical feature of these reports seems, however, to be a complete absence of information on any choices made and actions taken in relation to tax planning. There have also been some interesting related developments in the political forums. During the 1990s, civil society groups and international development organisations had already started to question non-payment of taxes by extractive industries in developing countries. The Extractive Industry Transparency Initiative (EITI) was set up in 2003 at the World Summit on Sustainable Development, offering a platform for corporations to voluntarily disclose their payments to governments in developing countries. In 2010, the US government took a step further in the Dodd–Frank legislation that required such companies to disclose their payments to governments in the developing world on a country-by-country and project-byproject basis (amendment 1504). The EU took a similar step, revising its transparency and accounting directives in 2013. Hong Kong has also introduced rules similar to those of the Dodd–Frank amendment 1504. While the main focus of these initiatives has been on tackling corruption, many of the arguments for increased transparency have centred on tackling tax avoidance or evasion. Civil society organisations such as the Tax Justice Network have demanded country-by-country reporting that would include much more country-level financial information than is required by Dodd–Frank’s amendment 1504 or by the relevant EU directives (Murphy, 2012). At the same time, various business lobbying groups in US and EU have aggressively opposed the aforementioned initiatives. This underscores the contested nature of corporate tax reporting requirements: on one side, civil society groups demand full country-by-country and project-by-project level disclosure of all key information of the corporations, and on the other, corporate-driven tax reports seek to extend or shift the discussion from corporate taxation to other taxes that companies need to pay or collect for the state. Through widespread media coverage of wellknown cases, however, corporate tax avoidance has come to be inscribed in the discourses of CSR and ethical business. These discourses have infiltrated and influenced public consciousness and expectations, making it more difficult for corporations to remain silent – even though, from a profit maximisation perspective, that may well be their best strategy, at least in the short term. Positioned within this discursive struggle, the presented case study highlights a clear need to further examine state-corporation relationships from the perspective of the political power of corporations over nation states (see Sikka, 2010, 2013). The present study is not without limitations. First, the analysis is based on secondary sources, limiting the possibility of discussing the case company’s actual intentions and motivations (even though the analysis is based principally on documents published by Stora Enso itself). Despite every effort to avoid the ‘‘fallacy of internalism’’ (Ferguson, 2007) through exploration of multiple data sources and careful analysis of alternative explanations, it seems likely that interviews with relevant personnel from Stora Enso could have helped to achieve deeper insights, although the obvious sensitivities may have precluded any willingness to participate. Second, the findings here are not directly generalisable to other companies or contexts (but see Gendron, 2009). Even so, it is argued that Stora Enso does represent a critical case in relation to tax behaviour and CSR disclosures, and that it would not therefore be too surprising to find similar practices at other major companies. Third, the case of Stora Enso is further complicated by the state of Finland’s substantial ownership share in the company, but a broader discussion of the state’s role remains beyond the scope of this paper. Limitations aside, it can be argued that, together with other recent work (e.g. Lanis & Richardson, 2013; Muller & Kolk, in press; Preuss, 2012), this paper has provided insights into the interlinkages between corporate taxation, CSR, and corporate

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disclosure. Further research might, for instance, use detailed case studies to shed further light on the role and activities of major accountancy firms in tax avoidance (see Sikka, 2008); the views of tax authorities would no doubt add an interesting dimension to such an inquiry. Finally, further discursive investigation of the development in different contexts of discourses around corporate taxation, tax avoidance, and responsible taxation would be a welcome addition to the literature. 7. Concluding remarks Tax is out and there’s no going back. It cannot retreat into its traditional obscurity behind the scenes. It has finally been recognised as a prominent player in the corporate drama and should be overseen and managed accordingly. (KPMG, 2006: 4). Despite increasing publicity, it seems likely that we have only seen the tip of the iceberg that is corporate tax avoidance. However, as more becomes publicly known about corporate tax arrangements through self-disclosure or the work of academics and the media, it seems equally likely that new regulations and best practices around taxation will eventually evolve. Companies that genuinely subscribe to values such as transparency, accountability, and open communication will have to take more seriously the need to disclose comprehensive and understandable information about their tax policies. For instance, given the increased public awareness and emerging debate on corporate taxation, it will be interesting to see how Stora Enso organises the pulp trade from its new mills in Uruguay and China, and whether it will consider it necessary to report fully on those decisions. Nonetheless, while voluntary discussion of taxation by the corporations is clearly a positive step, the only sustainable way of dealing with tax avoidance is by increasing the mandatory requirements for tax transparency. So far, the voluntary reports submitted under the EITI framework have been sporadic even though the system has already been operational for a decade. Likewise, the few voluntary CSR reports that discuss taxes have tended to shift the discussion towards those taxes that are not used for tax planning, which means that they are of little use when discussing the responsibility or otherwise of the corporation’s tax policies. Indeed, previous research on corporate sustainability and CSR reporting has shown that voluntary disclosures published by business entities tend to focus more on impression management than on providing any transparent account of activities (e.g. Boiral, 2013). It is implausible to expect business-led voluntary tax disclosures to be any different. Acknowledgments We wish to acknowledge the help of Lauri Fine´r, whose input was essential for this project. We are grateful for the constructive comments provided on earlier versions of the paper by Guest Editors Charles H. Cho and Sophie Spring, two anonymous reviewers, Jakob Donner-Amnell, Oana Apostol, Tommy Jensen, Lauri Lepisto¨, Risto Rumpunen, and the participants of the parallel sessions at the 9th CSEAR Spain conference in Burgos, January 2014; the 22nd Nordic Academy of Management Conference in Reykjavik, August 2013; and the 2nd CSEAR France conference in Montpellier, May 2013. Finally, the financial support provided by the Academy of Finland (project 250478) and the Finnish Foundation of Economic Education (Liikesivistysrahasto) is gratefully acknowledged. The usual caveat applies.

Appendix 1. List of documents used in the analysis

Issuer/author

Type/title

Year

Berghuizer Papierfabriek N.V. Corenso Edam B.V. Espebe Holding B.V. Fibria Celulose S.A.

Financial Report Financial Report Financial Report United States Securities and Exchange Commission form 20-F Merilinja Newsletter – OULU service Annual Report Financial Report Financial Report Handelsregisterhistorie Deponeringen Online inzage uittreksel Financial Report Annual Report Financials/Financial reports Corporate Governance Report Parent company financial statements Corporate Social Responsibility Report Sustainability Report Global Responsibility Report Business Practice Policy Environmental Eeport

2005–2010 2005–2009 2008 2009, 2011

Merilinja Oy Port of Oulu Scaldia B.V. Stora Enso Amsterdam B.V. Stora Enso Amsterdam B.V. Stora Enso Amsterdam B.V. Stora Enso Amsterdam B.V. Store Enso Nederland B.V. Stora Enso Oyj Stora Enso Oyj Stora Enso Oyj Stora Enso Oyj Stora Enso Oyj Stora Enso Oyj Stora Enso Oyj Stora Enso Oyj Stora Enso Oyj

3 August 2011 2004–2006, 2008–2010 2007 2004–2010 Obtained 16 April, 2012 Obtained 16 April, 2012 Obtained 16 April, 2012 2007, 2008 1998–2011 2001–2011 2009–2011 2007–2011 2002 2007–2010 2011 2011 2000–2002

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Appendix 1 (Continued ) Issuer/author

Type/title

Year

Stora Enso Oyj

The Stora Enso Principles for Corporate Social Responsibility Accounts filed in National Board of Patents and Registration in Finland Stora Enso Financial Code of Ethics Stora Enso Group’s Information Policy Press release: Stora Enso’s Oulu Mill receives first shipment of Veracel pulp Stora Enso Principles for Corporate Social Responsibility United States Securities and Exchange Commission form 20-F The Stora Enso Code of Conduct Corporate Governance in Stora Enso Stora Enso Q2 Financial Results 2009, Conference call Geconsolideerde jaarrekening over 1999 Handelsregisterhistorie Deponeringen Annual accounts Inzoomen op e´e´n niveau Uittreksel Handelsregisterhistorie Deponeringen Uittreksel Financial Report Bolagsordning fo¨r Stora Enso Treasury Stockholm AB Fo¨rvaltningsbera¨ttelse A˚rsredovisning a˚r 2010 Sustainability Report SEOAY.PK – Stora Enso and Arauco Joint Venture to Invest in a Pulp Mill In Uruguay, Conference Call, Final Transcript

2001

Stora Enso Oyj Stora Enso Oyj Stora Enso Oyj Stora Enso Oyj Stora Enso Oyj Stora Enso Oyj Stora Enso Oyj Stora Enso Oyj Stora Enso Oyj Stora Enso Timber DIY Products B.V. Stora Enso Timber DIY Products B.V. Stora Enso Timber DIY Products B.V. Stora Enso Timber DIY Products B.V. Stora Enso Timber DIY Products B.V. Stora Enso Timber DIY Products B.V. Stora Enso Timber Nederland B.V Stora Enso Timber Nederland B.V. Stora Enso Timber Nederland B.V. Stora Enso Treasury Amsterdam B.V. Stora Enso Treasury Stockholm AB Stora Enso Treasury Stockholm AB Stora Enso Treasury Stockholm AB Veracel Cellulose S.A. Thomson Reuters StreetEvents

Powerpoint presentations

2000–2010 2004 2004 15 August, 2005 2007 2001, 2006 2008 2012 23 July, 2009 Obtained 16 April, 2012 Obtained 16 April, 2012 Obtained 16 April, 2012 2010 Obtained 16 April, 2010 Obtained 16 April, 2012 Obtained 17 April, 2012 Obtained 17 April, 2012 Obtained 17 April, 2012 2004–2010 12 May, 2006 18 May, 2006 30 June, 2011 2005, 2009–2011 18 January 2011/3:00 PM GMT

Title

Date

Paper, Packaging and Forest Products (Nils Grafstrom, Latin America Division, Sa˜o Paulo) Welcome to Oulu Mill (Pentti Ilmasti, Oulu Mill) Continuing our Path – Proven Results Visible (author unknown) Focus on the Future: Stora Enso (Jukka Ha¨rma¨la¨, CEO Hannu Ryo¨ppo¨nen, SEVP & CFO) Stora Enso’s Way Forward (Markus Rauramo, CFO) Focus on the Future: Stora Enso Presentation (Esko Ma¨kela¨inen, CFO; Ulla Paajanen-Sainio, VP, IR and Financial Communications) Focus on the Future: Profit Improvement in Focus (Jukka Ha¨rma¨la¨, CEO, London) Focus on the Future: Stora Enso (Citigroup Global Paper & Forest Products Conference – New York, Hannu Ryo¨ppo¨nen, SEVP & CFO)

February 2007

Company Stora Enso Oyj Stora Enso Oyj Stora Enso Oyj Stora Enso Oyj Stora Enso Oyj Stora Enso Oyj

Stora Enso Oyj Stora Enso Oyj

6 November 2007 5 November 2010 22 August 2006 2010 23 August 2005

16 November 2005 7 December 2006

Databases utilized for the analysis Database

Issuer

Data type

Foreign trade statistics (country of origin, country of consignment) Trade statistics (Export, import, re-export and re-import statistics) International trade (Imports and exports according to SITC classification)

Finnish Customs

SITC 251 (Pulp and waste paper)

United Nations COMTRADE

SITC 251 (Pulp and waste paper)

CBS Statistics Netherlands StatLine

SITC 251 (Pulp and waste paper)

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Please cite this article in press as: Ylo¨nen, M., & Laine, M. For logistical reasons only? A case study of tax planning and corporate social responsibility reporting. Crit Perspect Account (2015), http://dx.doi.org/10.1016/j.cpa.2014.12.001