The nature of the relationship between strategic management and corporate taxation : the use of strategic management by the UK tax practitioner in corporate taxation
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Tax is a critical function in any organisation. In most developed countries, it is common for an organisation to pay nearly a fifth of its annual profit to the tax authorities before distributing value to shareholders. Suppose the primary goal of the organisation is to add value for shareholders. In that case, the expectation is that it will be strategic with its tax planning to achieve and sustain a competitive advantage. To accomplish this aim, the organisation can choose from several different strategic management theories and models. This variety leads to fragmentation in academia. Similarly, research in corporate taxation also lacks integration due to the different backgrounds of scholars. This commonality between the two subjects may explain why there is limited literature on the nature of the relationship between strategic management and corporate tax strategy. This research investigates three pertinent research questions. Is there a relationship between strategic management and corporate tax planning? Does an integrated strategic management framework show a relationship between strategic management and corporate taxation? Does the tax practitioner act strategically in corporate tax planning? A pragmatic paradigm is adopted using an interpretive research method with document analysis, questionnaire, and interview techniques. A defined, integrated framework of strategic management is established after an extensive review of the strategic management literature. The framework consists of the design, planning and positioning schools with the resource-based view and dynamic capabilities with creative action. This framework facilitates collecting empirical data from the tax strategy documents of the one hundred largest listed organisations in the UK (FTSE 100) and interviews and questionnaires with seventeen senior tax practitioners. Qualitative data is collected and reviewed through thematic and content analysis using NVivo software. Where appropriate, quantitative data is presented to support the qualitative evidence. An iterative approach is adopted for reviewing the tax strategy documents, helping to refine the data and improve the approach to interviews. The findings of the research show that tax practitioners are strategic in formulating the tax strategy. Therefore, the contribution to theory is that the research demonstrates that strategic management and corporate tax are aligned by analysing tax strategy using various interconnected strategic management concepts. The research concludes that tax strategy follows the commercial strategy and is both deliberate and emergent depending on the organisation's size and nature. The research contributes to practice by developing a strategic management tool kit for the tax practitioner to use in tax planning. The use of an integrated framework allows the tax practitioner to consider critical themes in strategic management. The paper advocates a checklist, which addresses the fundamental questions that the tax practitioner should consider for each theme. By embracing the integrated framework of strategic management and using it when formulating the organisation's tax strategy, the tax practitioner will ensure that the tax strategy is aligned with the organisation's commercial objectives.