Emotive stuff right?
Here’s what I think
Tax avoidance is not a moral issue; it is an issue of competitiveness.
On the other hand, tax evasion crosses that imaginary line in the sand between what are acceptable tax savings and what is tantamount to stealing from the society in which the tax-payer is resident.
That’s why it is illegal.
From this perspective, a company’s ‘fair share of taxes‘ is what it pays after the application of all lawful means, including tax avoidance but excluding tax evasion, of reducing its overall tax liability.
Since the payment of tax for most people is a legal and not moral obligation, a company’s obligation to pay its fair share of taxes must be set by law and not morality.
A company is a legal construct and governed by legislation not conscience. It is for this reason that acceptable company behaviour is compelled by law – reinforced by sanction – and not by reference to some inherent moral compass.
Why should the determination of a company’s fair share of taxes be any different?
Tax avoidance is not illegal nor is it a question of immorality because its availability is necessary to enhance a country’s competitiveness in its quest to attract foreign and mobilize local investment.
If this were not the case it would be far easier for law-makers to ban tax avoidance of any kind especially if their competitors did likewise. They are however reluctant to do because they are constrained by the dictates of a ‘free market’ economy premised on specialisation and the unencumbered movement of goods, services and capital across national borders.
Moreover, un-competitiveness has implications for national development and is inextricably linked to the quality of life of a country’s people.
That said, ‘aggressive’ tax avoidance is gradually being accepted as unlawful. However, without the universal, or near universal, acceptance of aggressive tax avoidance as illegal the competitiveness of those countries that ban it will be adversely affected when compared to those for which no legal sanction attaches.
So why are countries still not keen to prohibit all forms of tax avoidance?
Because they are an important means of attracting and retaining investment. Investment which provides jobs, creates infrastructure, generates foreign exchange, pays for social and other public services, drives down the cost of consumer items and contributes to government’s revenues; enabling it to execute the domestic, regional and foreign policies expected by the electorate.
What do you think?