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Is tax a moral issue?

Written by Robert Barrington on Tuesday, 21 May 2013

It was a surprise to read in yesterday’s Guardian and elsewhere the remarks of Sir Roger Carr, President of the CBI, that tax avoidance “cannot be about morality – there are no absolutes”.


It was a surprise to read in yesterday’s Guardian and elsewhere the remarks of Sir Roger Carr President of the CBI, that tax avoidance “cannot be about morality – there are no absolutes”.

Even more surprising was that his comments were supported by a number of well-known companies including BAE Systems. This is the same BAE Systems that was fined $450 million for ‘books and record offences’ having been accused of serial bribe-paying. And the same BAE Systems that was revealed in court to have routed payments to its agents via a hidden subsidiary called Red Diamond Trading registered in the British Virgin Islands a tax haven.

I assume that the corporate leaders supporting Sir Roger meant that it is up to companies to obey the law and not to make moral judgements on how much tax they should pay. To some extent I agree. Companies must operate within the law. Though it is worth noting that many companies seek to operate beyond compliance – doing what is ethical, and not merely what is legal.

Even operating to the legal minimum, as Sir Roger apparently advocates, leaves an uneasy feeling. What if that law is not fit for purpose because companies have lobbied against a law that would require them to pay more tax? What if the law has been partially drafted by firms of tax advisers which then help companies to exploit the loopholes they know exist? One might debate whether this is moral or immoral. One might debate whether this is corruption. But that misses the point.

In an age of austerity, how much tax companies pay their governments has become a question of resources-resources-business ethics. We have witnessed a series of ethical failures in resources-resources-business over the past few years – the banks, the horsemeat, the billion-pound fines for pharma companies.

These scandals, and many others, shine a spotlight on our corporate leaders. It may be that they feel the laws on tax need to be better written and that is a better basis for them to pay more tax. I do not have any sense that they are saying this in private, and certainly not in public. The tendency has been to defend the indefensible, rather than admit that society suffers when too little tax is paid, and that there needs to be a sensible solution to this. If they feel that what we need is tax law reform, then they should engage positively in such a debate, rather than trying to close it down or lobby against it.

Why is this an issue for Transparency International, whose natural territory is corruption and not tax justice? There are three reasons:

First, by most standard definitions, it is increasingly difficult to differentiate between tax avoidance and corruption, especially when corporate lobbying is part of the mix. There is a genuine danger of ‘regulatory capture’ in the UK – not just through lobbying of law-makers, but through ineffective tax enforcement officials. They may be too cosy in their relationships with companies, too under-resourced or too intimidated by the thought of fighting armies of lawyers and accountants.

Secondly, the architecture of tax avoidance is the same architecture used for corruption. Want to pay a bribe? Route it via a secret shell company in an offshore tax haven. The structures set up for tax avoidance have both facilitated corruption and led to a growth of a corruption services industry based in the UK which now has a self-interest in maintaining the status quo.

Thirdly, the CBI are apparently demanding that the Prime Minister should retreat on his agenda of ‘tax and transparency’ for the G8 – though apparently they are in favour of the third ‘T’, Trade. Let us be clear. Transparency is a good thing. Paying fair taxes is a good thing. Free trade, conducted between clean resources-resources-businesses on a level playing field, is a good thing. We need transparency and we need it about tax: what companies are paying, where they are paying it, and what is going on in tax havens. Ethical companies should be supporting the government’s G8 agenda, not lobbying against it.

It seems particularly ironic when our corporate leaders play the ‘bad for Britain’ card. It was also endlessly played, and some continue to play it, over the Bribery Act. Such assertions are marked by a lack of evidence, poorly-disguised self-interest and a descent into the moral low ground, usually in contrast to their companies’ value statements. The claim here is that it would be bad for Britain were we to act alone on tax. I disagree. Acting alone may be the only option, as agreement in the G8 will be difficult to achieve. Sorting out the UK’s own tax havens – our Overseas and Dependent Territories – is a good place to start and can be done by the UK acting alone.

In the run up to the G8, I would ask our corporate leaders to stop bullying the government when it is trying to accomplish important changes in the field of tax and transparency. To step back and think about what is in the long-term interest of the British economy and British society, and to speak out in favour of fair taxation, not against it.

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Read 14303 times Last modified on Tuesday, 24 November 2015 11:47
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Robert Barrington

Robert is TI-UK's Executive Director. You can view his full bio here, and tweet him @TIukED.

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