Nick Shaxson ■ “Good” companies may have to pay more tax than law requires, say theologians


Tax and morality CaidFrom Christian Aid, a new report exploring morality and taxpaying. Its introduction notes:

“Many developing nations are seriously affected by the way in which some multinational companies manipulate their profits to allow them to pay little or no tax in the countries in which they are operating. As Esther Reed observes in her paper, this simply feels wrong to most people.”

And it’s obviously crucial to investigate this. Here is the press release:


Oct 21, 2014 – Multinational companies may have a moral duty to pay more tax than the letter of the law strictly requires of them, according to a new Christian Aid report about tax and theology.

This will be an uncomfortable conclusion for many defenders of tax avoidance, who often imply that what is legal is also morally sound.

The report rejects this logic, pointing out that owning a slave and using child labour have in the past been legal. It argues that the morality of tax practices depends on their impact on human beings.

In her contribution to the publication, Tax For The Common Good, theologian Professor Esther Reed of Exeter University argues that tax avoidance is not right if it damages other people’s ability to live decent lives.

“Respect and care for the poor ranks higher in Jesus’ list of priorities than adherence to the law,” she says. “Global corporations may properly be expected to exceed minimal compliance standards on taxation, where failure to do so undercuts the conditions required for the flourishing of all.”

Such conditions are paid for by tax, she points out: “Taxes are paid for the sake of order and an infrastructure that puts out fires, keeps the streets safe, ensures legal safeguards for businesses and employees, makes sure that food and water are safe, educates children and more.”

Dr Reed’s argument echoes a point made by Margaret Hodge MP, Chair of the Public Accounts Committee of the House of Commons. When Google gave evidence during 2013 and insisted that its tax practices were entirely legal, Ms Hodge replied: “You are a company that says you ‘do no evil’, but I think you do do evil, in that you use smoke and mirrors to avoid paying tax.”

Another author of the report, Canon Dr Angus Ritchie, meanwhile argues from the Bible that both individuals and companies have moral duties to pay tax, based on their ability to do so.

Dr Ritchie, who is Director of the Centre for Theology and Community, says: “Businesses are parasitic if they make use of the resources and infrastructure of a country without contributing to it through taxation.”

He highlights the “tragedy” of many developing countries, from which companies extract resources such as minerals and oil without any apparent benefit for the vast majority of their citizens. “There is an urgent moral issue here and both governments and multinational companies must recognise their moral responsibilities to act in ways that are for the good of the countries in which they work,” he argues.

Dr Ritchie also criticises the view that wealth is generated by companies and then requisitioned by governments. “The ‘cake’ of wealth is not in fact generated by business and partially consumed by the state,” he argues. “Rather, the state and citizens are co-producers of that wealth in the first place, which already generates a prima facie entitlement to a ‘slice’ in order to continue to provide the environment and the public goods in which enterprise and commerce are possible.”

But Dr Ritchie recognises that governments themselves are as capable as the private sector of being corrupted and doing harm. He therefore argues that all citizens should have some private property, as protection against the excessive power of the state and also of other people – and that this is a reason for redistributive taxation.

Dr Rowan Williams, Chair of Christian Aid, says in his foreword to the report that greater tax justice will mean that some developing countries need less aid. “We at Christian Aid believe that [tax justice] is crucial to the goal of setting many nations on the path to greater self-determination and ending their reliance upon aid,” he says.

Read the rest of the release here.

In a related matter, we’d also point out David Quentin’s paper Risk Mining the Public Exchequer, which also explores, among other things, the confusions that emerge when people try to focus only on the narrow question of the legality of tax avoidance. Further, Quentin wrote an article yesterday (with the excellent headline People talking out of their asset classes ) in which he noted that it is tricky to debate the morality of abusive tax behaviour:

“that debate could be eliminated by replacing the word “immoral” with the word “anti-social”. There is now a rock-solid consensus that abusive tax behaviour is anti-social.”

And, more specifically, some clear thinking to finish:

“I find it so strange that you still hear voices proclaiming that the amount of tax payable is a matter of law and that extra-legal questions of behavioural propriety do not bear upon the matter. This narrative deliberately steps in half-way through the process and ignores the beginning. Yes, once the relevant transactions have been entered into, the amount payable becomes a matter of the law as it applies to the facts, but the anti-social behaviour in question has already taken place by that stage. It is the entering into those transactions in the first place, not the decision to claim their alleged benefits, that is the anti-social behaviour.”

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