I really like it if I get a refund cheque from the ruling tax authority. I feel like I’ve had a bit of a win. Something like David, having a small victory over the Goliath in the room.
I guess that means that I like to pay a low amount of tax. But I’d like to think that I am also fair about it, in that the tax department gets to keep a relatively large chunk of money based on my income (somewhere in the region of 30-40% usually).
And so I have some sympathy for entities wanting to pay a lesser amount of tax. It feels good, it often takes a bit of rudimentary smarts to make it happen and it means the entity has cash with which to do other things (my favourite motivation!). Any three of those things is reason enough to pursue tax minimisation. But I think it’s not OK to keep doing it until no tax is paid at all. Putting that another way, I don’t think it’s OK to ignore the consequences for everyone else of not paying any tax myself.
Which is why I find Jimmy Carr slightly less funny than I used to.
It’s not that his punch lines are any less witty (or caustic), but that I struggle to bring myself to forgive him for striving to pay no tax whatsoever. And I don’t buy the line that he was just taking advice. Structuring tax affairs isn’t really anything like taking advice from a doctor on fixing an ailment, unless you think that paying tax is an ailment. I think paying tax is quite a good thing to do.
And most of us agree that paying tax is an important part of living in a stable and constructive society, including Jimmy Carr, which is why he did a sketch giving Barclays a hard time about their low amount of tax paid in the UK because of their corporate structure.
And it’s also why I feel slightly uncomfortable about companies that strive to pay the absolute minimum tax they can. Unlike most of us individual tax-payers, large companies can choose where their main tax jurisdiction will be. They can therefore make decisions not just about minimising tax, but about how much tax they will pay and to whom. I think that gets my goat a little bit because I’m happy that the tax department keeps some money so that it can give it to government which then does things like fund education, health and welfare. I value all of those things, so I’m happy!
I wish that companies that strive to pay the absolute minimum tax they can would also value things like education, health, welfare and social stability a bit more, especially given that they benefit significantly from all of those things.
But before we look closer at companies paying tax and how much they pay, I think it’s important to understand why constructing a tax framework is, by its very nature, conflicted and tricky for governments; and why organisations need to carefully consider how they may or may not take advantage of various tax havens, benefits, discounts and loopholes.
In this series, which does get a bit more serious from here on in, I will look at several things, as follows:
- Provide a framework to talk about tax as an issue for business.
- Identify some differences between individual tax payers and businesses.
- Identify the difference between tax as a legal issue and moral issue.
- Give organisations some tips on how to have a clear and compelling position on tax.
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This is part One of a Four part series on Tax. Other parts are available below: