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In the guise of Corporate Social Responsibility (“CSR”) the Government is delegating the social work in the hands of corporate; is CSR becoming a Government Shirking Responsibility (“GSR”). It is difficult to believe and comprehend that corporates have come forward to build toilets in the country after the prime minister made an appeal, building toilets is predominantly the responsibility of the government and not corporates. The Government, at best can force tax (“Lagaan”) on a corporate but not CSR, as CSR is always by choice and not by force. The companies are already paying direct and indirect taxes, an additional education cess and apart from this 2% of its profit for CSR, is it not asking for a little too much from corporates?

To be a capitalist or a socialist

This concept of GSR is in the wake of a recent issue of building toilets in the country where quite a few enterprising entrepreneurs came forward and offered to build toilets across the country. These entrepreneurs are in business of doing business and not building toilets and that is not the objective of the company. How can a CEO take a decision to deploy the shareholders hard-earned money to build toilets and flush the funds out of the company? It is amusing that a corporate is required to do social work, apart from creating employment to millions of people, which in itself is a social responsibility. Are these capitalist looking to socialism only to play to the balcony?

A small change or big change

Is the GSR using the CSR quota to cure some immediate social problem? Today it may be an issue of toilets, or about the floods, next it may be an epidemic, or a disease or malnutrition how can the government not take ownership of these issues and expect corporates to provide a solution to the problem through CSR initiatives. There was interesting headline when the Ebola broke out “Should Bill Gates contribute to Ebola”, Gates has already done quite a bit for healthcare. Is it fair that we look up to entrepreneurs to fund all these social causes? Is it a small change that is expected from the businessman or the big change that the Government is responsible for and for which it will have to act on its own?

NGO cannot substitute Government

Social cause is inclusive, that is all-encompassing an activity that is required to be done by the government for the welfare of the under privileged. CSR as an inclusive growth instrument was introduced in the legislation to ensure that Government can use the corporate to fund the NGO, and the NGO will use the funds to benefit the government to execute some of its social responsibilities. This inclusive growth story of 108, the Ambulance service that was implemented for the welfare of the countrymen by the CEO of an IT company who was running the ambulance service through an NGO, may have succeeded in the cause but failed in the purpose, as it was billing the government almost three times the cost. This modern day Robinhood, who incidentally happened to be the mastermind of the biggest corporate scam in 2009, was misusing the NGO in the guise of serving the poor.

Government to Institutionalise CSR

What a government has to do only a government should do, the corporate cannot pay the salary of a teacher in a government school or pay the electricity bill in a school. There is all round confusion for corporate on what to do and what not to do without legislation in place and the areas of CSR spend in the schedule are general and ambiguous in nature. Why not institutionalize CSR, with billions of rupees at stake in the next 5 years why should the government not set up a dedicated trust / NGO to take care of specific problems. The companies instead of having a personal agenda or no agenda can work towards an agenda that can be set by the Government every year. This will ensure that the goals of the government to serve the under privileged can be better addressed with this fund which can be managed by the trustees appointed by the regulator. The option to institutionalise the CSR initiative by forming a separate fund and monitored by government nominees can result in a more meaningful and legal spending of the shareholders money.

Lagaan - Why is the corporate being taxed (2% of profits) to do a social cause and further CSR is made taxing (no regulations) to perform in this country – is this a case of double taxation?


Published by

Sundharesan Jayamoorthi
(Practising Company Secretary )
Category Corporate Law   Report

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