stakeholder

What can a shareholder do in the context of a company. A shareholder invests its money in a company. It's entitlement to a return is through dividends declared by the company. A creditor lends money to the company. It's entitlement to interest is based on what is contractually agreed. An employee works in a company and is entitled only to its salary at the end of each month.

What is the entitlement to the tax authorities? At which level should it be placed. The tax authorities collects tax based on profits made by the company. In terms of income tax, the tax authorities at best is at the same level as the shareholder. It is entitled to a share of the profits of the company. Is the tax authorities entitled to more than what the company earns? It is not even at the same level as the creditor. Why? Because it has not committed any resources to the company. When the revenue legislation places the tax collection at the profit level, it must have intended that the tax authorities can only come in to take a share at the profit level.

It does not have the right to tell the company how to run its business, just like the shareholder cannot tell the board of directors how to run the company. The tax authorities cannot step beyond the boundary of collection. If it in anyway, directs the company what to do, the tax authorities may have acted ultra vires the revenue legislation.