Art of Getting Away With It.

May 28th, 2013

This is undoubtedly what Pope Francis was referring to when he told a group of ambassadors last week, including some from notorious tax havens, that as a result of such practices “a new, invisible and at times virtual tyranny is established, one which unilaterally and irremediably imposes its own laws and rules”. Public tolerance of this behaviour is wearing thin, particularly in countries struggling to raise enough tax to finance public spending in a climate of economic austerity. What has become clear is that no one country, not even the United States, can hope to stamp out the blight of international tax avoidance on its own. What further complicates the matter is that several countries – Ireland has been singled out particularly – have benefited hugely from the system and may not be keen to kill the geese that have laid so many golden eggs.
Google’s senior executive in northern Europe, Matt Brittin, was recently berated by Margaret Hodge MP, chairwoman of the House of Commons public accounts committee, for trying to excuse company behaviour that was “devious, calculated and, in my view, unethical”. In America, Apple’s chief executive, Tim Cook, was called to account by a congressional committee for the way his company structured its operations so that some parts of it paid no tax at all.
In each case, the executives purported to be baffled and not a little indignant – they were only doing what the law allowed, in the interests of their shareholders. In both cases, Ireland’s tax regime was a key factor.
What was at stake in all this was well expressed by the BBC’s Robert Peston, who commented that minimising taxes “may be rational for them individually but is bonkers for them collectively – since over time it will erode the very infrastructure of the global economy which allows them to thrive”.
That is both an ethical and a self-interested reason for large companies to reconsider what they do. But to ensure that the better ones are not undercut by the worse, some international coordination will be necessary. This has to ensure that an international corporation pays its fair share of tax on the actual profit it makes in each of the countries in which it operates.
That is the message David Cameron says he will take to next month’s G8 summit. He must expect to have it pointed out, however, that through the Cayman, Virgin and Channel Islands tax havens, not to mention the City of London itself, part of the remedy lies in Britain’s own hands.