Arvind Lall is a Lecturer in Taxation and Ethics at Kent Business School, University of Kent and also a tax practitioner, commenting on the following recent BBC news item:
Starbucks ‘planning changes to tax policy’
Reading the above report the questions raised in my mind suggest a unique, if not confusing, way of dealing with the ethics of tax avoidance. Is there a solution?
The act of tax avoidance on this recent story is clearly seen as immoral by Margaret Hodge MP, as that was the accusation she put to Starbucks and others. The moral law here appears to be privileged over statute/tax arrangements. The goverment that allows royalty transactions unchallenged by law also calls the use of these immoral.
This is quite unprecedented, as avoidance is still within the law, and there is no intention of making any changes either. So where do corporations stand now, and professionals stand in advising on tax arrangements for their clients? Are they now to be guided by the moral law instead? It is interesting that other companies such as Amazon have not changed their position on avoidance yet.
The government’s position is that corporate taxes cannot in future be voluntary (Danny Alexander MP on BBC Andrew Marr) and tax must be paid. Starbucks’ decision could have been influenced by moral conscience (Aquinas) or virtue (Aristotle/Maclntyre) resulting in overriding their tax arrangements for profit. Being a global business I would imagine there is also some element of commercial wisdom in Starbucks keeping their customers happy by paying some tax.
The Starbucks decision to agree to pay tax is also seen as people power winning in the end (BBC Panorama – Dec 2012), which is the classic conflict of the individual (company) versus the community. It is interesting to note that the ancient Greeks recognised the community having at least a theoretical priority over the individual, and I am also reminded by their belief that virtue is learned through integrating with society.
However, despite Starbucks decision to pay tax others such as Amazon have not gone along with them. This still leaves the question open as to what companies and professional advisors ought to do in these confusing circumstances. Do these persons now not have the right to arrange tax affairs without breaking the moral code?
To avoid this dilemma it seems to me that change is needed. UK needs to have new agreements with other countries where royalties and transfer pricing would, whilst acceptable commercially, not result in any tax benefits for these corporations.
Arvind Lall‘s previous expert comments include:
24 July 2012: Government to name and shame wealthy tax avoiders
25 June 2012: Jimmy Carr tax avoidance, moral or not?
13 June 2012: Lauryn Hill responds to tax evasion charges