Although the public debate on tax is now a long running topic of interest, there is still no clear consensus between tax commentators and tax practitioners alike on the core issue of where the dividing line between authentic tax planning strategies and tax avoidance comes.
In terms of corporate behaviour, there is no reason in my view why a multinational corporation or, indeed, a small/ medium size enterprise, should not take account of the incidence of tax upon their operations and seek to reduce it. This does not mean, however, that ‘anything goes’ which might just about be legal. There are recognisable abuses of tax law and aggressive/egregious tax avoidance techniques which we should expect a business not implement. Indeed, doing so, could well lead to a loss of market share, and broader disadvantages in its perception by the public which is much more interested in such matters than it was a decade ago.
On the issue of tax rates, the term ‘common interest’ needs careful consideration. I do not think there is evidence that a higher level of taxation as a percentage of the gross national product leads to faster economic growth or even to a fairer society; indeed, much of the evidence suggests quite the opposite. It should be recognised that there is a limit to the quantum of taxation the government of any country can safely extract from both its businesses and its individuals without damaging its economy and, of course, having a limit is in the interest of their people as tax rates and reliefs will always be competitive fields between countries.
There is an assumption made by some that a business wanting to pay more tax is somehow morally superior to one which seeks to mitigate its taxation liabilities. Much of this is based upon a simplistic perspective of whom the shareholders of a listed company are. For many years, the beneficial shareholders of almost all listed companies have not mostly been a handful of the super-rich but the much more modest investments held by millions of investors through their pension funds, ISAs and other investment funds whether these are held directly or through intermediary fund entities.
Both “responsible taxation” and “common interest” might provide initial shorthand expressions to indicate areas for tax policy reforms. However, it is essential that there is sufficient agreement on what those terms mean before such reforms are promoted, let alone enacted. In some cases this may mean agreeing to disagree, and for political representatives to outline what they propose so that we can choose to support their policies or otherwise. This also may require a greater degree of “tax policy literacy” amongst a public that often takes most of their information on tax from angry headlines. But to rely on presumptions that we all agree in the first place, and ascribe to the same shorthand principles, will not aid a responsible discussion.