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Multinationals Regard Tax Avoidance as a Moral Imperative. Isn't it Time We Made Them Pay Up?

Posted: 30/10/2012 20:00

In the midst of the Jimmy Carr tax avoidance scandal earlier this year (in case you were holidaying off-planet that week, Carr was left rather red-faced after it emerged that his accountant was channelling the comedian's earnings into a Jersey-based tax shelter), the BBC carried a fascinating interview with accountant Ronnie Ludwig. Yes, that's right, a fascinating interview. With an accountant.

As you might expect, Ludwig drew a firm distinction between tax evasion (trying to avoid playing tax by illegal means) and tax avoidance (attempting to mitigate the amount of tax you pay). But what most interested me was his answer to the question "Is morality part of your business?"

No, it isn't. We do not sit in judgment of our clients' moral values, nor do we preach morals to them. What we do is give advice based on the law.

Pushed about whether a tax avoidance scheme designed to circumvent the intent of the law would bother him, he replied: "Probably, on a personal level, yes. But I'm there to advise on the legality of it, and if this particular scheme would work, and that is it." I have no doubt that Ludwig's stance is standard practice in most areas of professional life.

Jimmy Carr at least had the decency to be embarrassed once his tax arrangements became public ("I now realise I've made a terrible error of judgment"), but yesterday a gem of a press release landed in my inbox from Nigel Green, the chief executive of the deVere Group, the world's largest independent financial advisors. Written in response to David Cameron's comments in parliament last week that he was "unhappy" with the level of tax avoidance by large corporations operating in Britain, Green retorts:

Mr Cameron is slamming companies who take legal measures to minimise their tax liabilities. Of course businesses try and mitigate their taxation as they have a responsibility to their shareholders to turn as large a profit as possible, which is both honourable and economically responsible as profit creates jobs and wealth.

That word 'honourable' really leaps out - and not just because I've italicised it. Green and his ilk appear to believe, entirely sincerely, that tax avoiders are performing a morally laudable public service. This despite the fact that the 'wealth creator' argument has already been comprehensively dismantled (for a quick overview, I recommend this brilliant column by the Guardian's Aditya Chakrabortty, this article by Salon's Michael Lind, or Matt Taibbi's long profile of Mitt Romney in Rolling Stone).

Better yet, Green goes on to say in his press release that the prime minister having the audacity to refer to massive corporate tax avoidance constitutes "demonising corporations" and could "incite protest groups to employ 'direct action' tactics against major brands". David Cameron: anti-corporate rabble-rouser. It's certainly a novel approach.

Trying to frame a rational response to this level of brazen brass neckery (dictionary definition: 'someone with no sense of shame about what they do') is extremely difficult. All we can say for certain is: Toto, I've a feeling we're not in Kansas any more. The global financial elite is operating in a mirror world, one in which black is white and up is down and being asked to pay your full tax bill is not only a gross imposition, but as Green makes clear, to do so would be a gross dereliction of duty to your shareholders.

Appeals to corporate conscience or the public good are now worthless. The only way to clamp down on tax avoidance is strict regulation and an aggressive approach to closing loopholes.

But the problem with closing loopholes, as Amy Rosenbaum pointed out in reference to VP nominee Paul Ryan, is that it requires standing up to the special interests that benefit from them. Unless the cosy relationship between UK politicians and multinationals is severed, the prospect of getting large corporations to pay their full tax bills seems a distant blot on the horizon.

 

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