Acceptable levels of tax risk as a metric of corporate tax responsibility: theory, and a survey of practice

Prescribed levels of acceptable tax risk are in-creasingly used to articulate degrees of corporate tax re-sponsibility, but the theoretical basis for doing so is notwell established. This article (i) develops a theory of therelationship between tax risk and tax responsibility and(ii) shows that acceptable levels of tax riskcouldbe usedas a meaningful metric for these purposes, provided thatthe filing positions anticipated from proposed planningare reviewed against the prescribed level of acceptable riskwithout taking into account any mitigation of the risk fac-tors that are introduced by the planning. Further, the arti-cle reviews the evolving tax risk policies of 20 large Euro-pean companies, showing that while some progress is be-ing made towards meaningful discourse, even the compa-nies with the most well-developed policies are still makingtheir claims in such a way as to conflate socially respon-sible tax behavior with diligence in implementing anti-social tax behavior.