The panel also thinks that the mandatory clause may lead to irregularities in revenue accounts and will give high hand to Government officials to nail companies on the mandatory spend. This would lead to more corruption in the system.
NEW DELHI: It has reported that while this is a known fact that the policy makers of the country in the Planning Commission are opposed to making Corporate Social Responsibility (CSR) mandatory for companies, the reason is more so interesting.
The panel believes that this would be like donating some money in the temple and seeking pardon for one’s sins. Moreover, the panel thinks that this will make the system corrupt and give Government officials high hand to harass companies.
Planning Commission Member (Industry) Arun Maira told , “Making CSR mandatory would be like asking a person to donate a certain amount in the temple and seeking pardon in return. We believe that making CSR mandatory would be at the cost of accountability of companies. Companies may take certain liberty in lieu of accountability towards the system if it is thrusted on them. They may reduce wages or be non-transparent or be unfair to the workforce. We think the best way would be to make them more accountable to the system and the society. For this SEBI has set certain global standards to be followed by Indian companies and we believe that’s the right way.”
Recently, in a Cabinet note on amendments to the draft Companies Bill, the panel has said that CSR should not be made mandatory. Rather companies should take up CSR on a voluntary basis.
The Cabinet note was circulated to take views of various stakeholders on proposed amendments in the Companies Bill on recommendations of the Parliamentary Standing Committee on Finance’s on Companies Bill. One of the proposed amendments seeks to make it compulsory for companies to dedicate 2 per cent of the average 3 years’ profits of the companies to be spent on CSR activities.
But the plan panel is opposing it saying that “responsibilities of corporations towards society should be taken up on a voluntary basis, and aligned with best practices elsewhere in the world”.
The panel also thinks that the mandatory clause may lead to irregularities in revenue accounts and will give high hand to Government officials to nail companies on the mandatory spend. This would lead to more corruption in the system.
In the past, Planning Commission Deputy Chairman Montek Singh Ahluwalia had said that making CSR mandatory for companies would amount to “privatising taxation”, adding “There are certain proposals that you should introduce a legal requirement that companies should spend a certain percentage of their profits on CSR. I am not in favour of that… That amounts to privatising taxation.”
He said if the Government wants, it can increase the rate of corporate tax to 32 per cent from the current 30 per cent rather than making it mandatory for companies to spend 2 per cent on CSR.
Experts, too, echo the plan panel and question when they are already paying the taxes, why the Government is not able to do the kind of social welfare activities they want us to do? Experts also agree with the plan panel that the mandatory clause will give Government officials a strong tool to harass companies.
