As the G8 meet in Northern Ireland this week, the issue of corporate tax avoidance is high on the agenda.
The issue has been bubbling for some time – UK Uncut have sought to highlight the injustice of radical cuts to public services while profitable companies structure their international organisation to pay what the Financial Times calls “vanishingly little” corporate tax. The House of Common’s Public Accounts Committee, led by Margaret Hodge, has been trying to land punches on corporate big beasts like Amazon, Google, and Starbucks for the last 18 months. Starbucks, you will recall, were embarrassed into paying £20 million extra (or were they?).
Christian Aid is campaigning to highlight the effect of aggressive avoidance on poorer countries, and have commissioned a ComRes poll which found that 66% of Britons now believe tax avoidance to be morally wrong. A third of us are currently boycotting particular companies because of their failure to pay a fair share of tax and a further third are considering such a boycott.
One Public Accounts Committee hearing reached something of a dénouement after Google UK’s Vice President Matt Brittin had insisted for the umpteenth time that the company was acting entirely within the law. An increasingly frustrated Margaret Hodge growled, “We are not accusing you of being illegal; we are accusing you of being immoral”.
“It’s not a matter of personal choice”, the shell-shocked but persevering executive replied.
And that is about as far as the debate has got. Ministers, MPs, clerics and campaign groups fulminate, and demand to know why the companies have been ignoring their moral obligations. The companies retreat behind the shelter of the law, claiming the pay what they are obliged to pay. How could they do anything else? If we don’t like what we get, then we should change the law. Companies can’t be expected to ‘act morally’, whatever that means.
In this debate, then, moral claims have made little headway. Like Hannah Arendt’s argument on truth in the politics, it seems that morality is powerless in the public realm. Morality, again like Arendt’s account of truth, is vulnerable to being broken up into “mere opinion”, or personal choice – which is a realm of subjective commentary, ideology, choice. Law, on the other hand, is clear and unambiguous. A company director’s (again, legal) responsibility to his shareholders is what matters. All else – as Rabbi Hillel once said – is commentary.
This is a poor set of arguments, and here’s why.
First, Matt Brittin and others who push this line (wilfully mis-) understand how ‘morality’ plays out here at all. No-one is suggesting that company directors should divine the amount of tax they are to pay through sophisticated expositions of this or that moral theory. They are to accept, along with the whole body of responsible ethical thought in both theological and philosophical traditions, that lying for pecuniary gain is ‘a bad thing’. Therefore, they ought to file profits in the jurisdiction they are made. We want, in other words, companies to be truthful.
This isn’t a big, nor sophisticated, an ask. Indeed, you might even say that being truthful shouldn’t be ‘a matter of choice’.
Second, the suggestion that we ought to change the law if we want more tax is cynical. The law already sets rates of corporation tax, which reflects the levels of taxation that out Parliament has said is needful and just. As international organisations, they can operate above the heads of single jurisdictions, knowing full well that cooperation in this field is very difficult indeed. New tax laws in any single jurisdiction would simply be gamed in new ways.
Third, company directors are already legally obliged to have regard for more than just profit: the long-term consequences of their decisions, the interests of employees, relationships with suppliers and customers, the impact of corporate activities on the community and the environment, the company’s reputation for high standards of business conduct and the need for fairness between different members of the company (Companies Act, 2006). As the admirable John Kay points out, British company law does not oblige directors to promote the interest of company members at any cost. If they avoid tax, they’re doing it because they can, not because they must, and in a way that clearly runs against the spirit of the law.
Of course, there are all sorts of extenuating circumstances that might be claimed. Some might even apply. But yes, for the reasons set out above, and for dozens of others, tax is clearly a ‘moral’ issue. That doesn’t require company executives to take courses in ethics or moral philosophy, nor to launch erudite debates about what might be a suitable ‘grammar’ for ethics and business. It simply requires that they do the right (and legal) thing.
Paul Bickley
Image by HM Revenue and Customs from flickr.com under the Creative Common Licence
