Paying and Praying – Morality and Taxation

 

My children have attended the local state primary school in London which is a church school. It became clear early on that there were a limited number of local children at the school because a large proportion of places are allocated based on church attendance in the parish rather than residence therein. One of the parents referred to “god points” in terms of school places, another that one either “pays or prays” ,paying for a private school or praying to get into a church  school.

I therefore read the Archbishop of Canterbury’s remarks on 4 February 2015 on tax and social responsibility with interest as they form part of a number of comments on the responsibilities of companies to pay tax. Justin Welby is quoted on the BBC as saying:

‘There has always been the principle that you pay tax where you earn the money. If you earn money in a particular country, the revenue service of that country needs to get a fair share of what you have earned.’ ‘There needs to be simplification in tax so that people are responsible in the right place.’

The Guardian newspaper reported this under the headline:

“Archbishop of Canterbury speaks out over firms using tax havens”

Christian Aid responded to his remarks:

‘We are delighted to hear the Archbishop speaking out about this great problem of our time. Many big companies are abusing their power and failing to contribute their fair share back to society, both in the UK and in developing countries,’ said Toby Quantrill, Principal Economic Justice Adviser at Christian Aid.

‘There is a huge moral dimension to tax so it is especially good to hear Justin Welby bringing his moral authority, as well as his business experience, to bear on the subject.

What you may have missed were the comments by the Governor of the Bank of England at the World Economic Forum at Davos as reported again in The Guardian:

“Davos: Mark Carney calls for tech sector to show ‘responsibility’ over tax

‘The amount of tax they pay is small in relation to the system,’ Bank of England governor says

The governor of the Bank of England, Mark Carney, challenged the world’s big technology companies to pay more tax as he stressed the perils of growing inequality at the World Economic Forum, in Davos.

Carney said IT companies needed to show a greater sense of responsibility. “Some of the firms that take advantage of international tax rules are the tech companies,” he said. “The amount of tax they pay is small in relation to the system. A sense of responsibility is needed.”

Carney did not name any tech companies by name, but his remarks will add to the pressure on firms such as Google, which uses offshore arrangements to reduce its tax bill in the UK.”

Now none of these interventions are particularly surprising, but their agglomeration tells us something about where we are in the debate about Tax Avoidance and the whole BEPS process.

I’ve had a number of conversations with corporate tax advisers over the last few months about where we are and the likely outcome of BEPS, for obvious reasons I’m not going to name my sources but what comes through in those conversations is a gap between their perception of the direction of travel in this debate and the denial of this at Board level because of the impact on earnings.

I’ve written about this previously because obviously if a company faces an increased tax bill, its future earnings will fall (as they are calculated after tax) and unless the price/earnings ratio changes then it’s share or stock price will fall as earnings fall. Prudent companies give forward guidance to analysts of their tax charge, it’s interesting that there is this level of denial about the probable/possible outcome of BEPS among tech firms.

Morality and Tax is a difficult subject. Judith Freeman at CBT, Oxford has done some very good  work on this, but I think this area is now so political that it has moved away from a principled debate. The challenge that Justin Welby poses is an interesting one (which one presumes will be reinforced by the CofE de-investing in companies which the CofE believes don’t pay their fair share?). For tax advisers of a religious  bent there is another challenge, to turn around where I started this blog, if they want to pray, do they (and those they advise) need to pay?

 

© Chris Lenon and www.green-tax.co.uk  2014-2015. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Chris Lenon and www.green-tax.co.uk with appropriate and specific direction to the original content.

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