Monday, 3 December 2012

Tax Avoidance

The tax avoidance strategies of large international firms like Starbucks, Google and Amazon have become a big political story in the UK recently. But of course it isn’t only a UK story – it’s a global issue precisely because these are global companies. In my book, I give a little explanatory one-liner (p.128, note 5) that tax evasion means illegal tax-dodging, whilst tax avoidance means legal ways of reducing tax liability. That’s true so far as it goes, and it is the defence wheeled out by these companies. But it hides a more complex reality: what constitutes legal tax avoidance is a matter of interpretation and of negotiation between companies and tax authorities. And beyond that it constitutes a matter not of legal technicality but ethics and political philosophy.

What lies behind this is the way that economics has run ahead of politics. Globalization was to a large extent produced by national political decisions to open up world markets but, having done that, the capacity of national polities to regulate global companies has disappeared, as s I mention in the book (p.107). The genie can’t be put back into the bottle. It may be possible for national governments and national public opinion to ‘shame’ global companies into paying more tax, but that is only going to be limited in effect, and possibly contradictory. For example, Starbucks has just said that it will pay more UK tax, but it is also cutting back on the rights and benefits of its employees. This is also, by the way, an indication of why issues of economics and politics are inseparable from those of studying organizations, something I am so keen to argue in the book.

If there is an answer to these issues it can surely only come from inter-governmental action, and an internationally agreed tax regime, but at the present time the institutions to take such action are pitifully weak. One thing which is worth saying is that concern about the conduct of these companies is not, inherently, anti-capitalist. Some of the biggest losers in all this are the local coffee shops and book shops which have no choice other than to pay their taxes and, as a result, are severely disadvantaged. And hence their employees, the local high street, and our sense of community. To make organizations work we have to re-connect ownership, employment and place. That may also mean that we all – me included, as someone who, for example, buys and sells books through Amazon – need to pay a bit more. More importantly, we have to be prepared to vote for political parties that tell us that uncomfortable truth.

Because the bottom line is that for all that we may bemoan its consequences, for 30 years or so significant numbers of us have deemed ‘unelectable’ any political party which questions the orthodoxy of economic globalization, or the doctrine of self-interest that makes it both inevitable and justifiable that companies will minimise their tax liabilities if they can get away with it.

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