The tax avoidance culture who is responsible

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Judith Freedman Judith Freedman. Oxford Academic. Google Scholar. Select Format Select format. Permissions Icon Permissions. Article PDF first page preview.

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At a time when government spending cuts are having a real impact on the everyday lives of people, some say it is morally indefensible for multinational corporations to be avoiding paying their fair share of UK taxes.

Avoiding tax is avoiding a social obligation, it is argued. Company directors will often argue, however, that their responsibility is to maximise the value they deliver for their shareholders and that includes keeping tax costs to a minimum within the realms of what is legal.

It has been widely alleged in the media that many multinational companies, apparently operating very successfully in the UK, are paying little or no local corporation tax. This has attracted much negative media coverage as well as attention from campaign and public interest groups such as UK Uncut and the Tax Justice Network.

The result is that corporate tax has become a major business ethics issue see Box 2. Public anger over tax avoidance increased in , according to a survey of the British public by Christian Aid. Associated British Foods in Zambia. The governments which set the basis of corporation tax have also been the target of public annoyance.

These survey results perhaps suggest a need for government to pay more attention to explaining their position on this issue and their interpretation of the law in order to bring more certainty for business. Businesses themselves need greater internal engagement around the decisions and circumstances behind their tax position. This then needs to be communicated externally, telling the story behind the business decisions that have lead to where and how much tax has been paid.

This transparency would help restore trust with the public. In , HMRC declared that. Its framework does not suggest that companies pay more tax, but rather that they ensure tax contributions are a demonstrably fair return to society.

It is good practice for companies to have a clear and transparent statement regarding their position on payment of tax. For companies that claim to operate according to a set of ethical values and commitments, it is these values that would be expected to underpin such a statement. Some companies do address tax as an issue or commitment in their code of ethics or similar guidance. The majority only declare a commitment to avoiding illegal tax evasion and abiding by the legal requirements of the countries within which they operate.