The CSR Tax

Posted by Ranjith R Menon on Nov 3, 2012
Sometime in the coming months the government will introduce the new Company Bill with the controversial provision asking companies to spent 2 per cent of their net profit on CSR (Corporate Social Responsibility).

Well I am not here to argue for it or against it. There are merits and demerits as in case for any such initiatives. The intermittent debates and opinions in the mainstream media has over the last few months since the proposal became public has predominantly panned the move. The key points raised by the critics being;

  • It still not clear whether the provision is going to be compulsory or indicative. Whichever may be the case it definitely is not a good idea for government to meddle into what a legitimate business should do with its profits. If resource mobilisation is the issue be straight forward and introduce a social responsibility cess on corporate profit and channel same to the kitty of the schemes like NREGA, NRHM etc.
  • Secondly it totally misses the whole point of what CSR is about. To quote from Swaminathan Aiyer; “It is an ethical attitude, a determination to observe the highest standards in dealing with all stakeholders – customers, suppliers, shareholders. CSR means observing the highest standards in dealing with health and environmental hazards, and in presenting corporate accounts accurately.” No management can put it more eloquently. It’s about the right way to do business not essentially funding some social work. (Read a wonderful take on issue in Swaminomics, the The Sunday Times column.)
  • Finally it is going create a new opportunities for creative accountants to cook up the accounts and balance sheets to show compliance to the provisions of the law.

It is simple; it matters you run a business in an ethical and lawful manner; and take care of your customers, employees, community and the planet. It is not about building a tertiary care hospital after you have acquired the lands of farmers and pushed them into the urban slums.

But on the bright side it could have a bright side for healthcare. There could be a larger influx of funds for health issues. Whether some of a the bright new social entrepreneurs has it in them to build sustainable models for provision of healthcare in rural areas and increase accessibility for the poorer sections of the population is a million dollar question; well why just a million it could be even worth a billion for that matter…