A person who takes an ethical perspective is likely to evaluate the tax avoidance strategies of one public leader – and those of others – with less scrutiny. As long as a person complies with tax laws and acts legally, tax avoidance strategies are likely to be considered ethical. On the other hand, tax evasion is not illegal. It simply uses the legal possibilities and loopholes in the system to minimize tax liability. This requires the invention of transactions and structures that reduce taxes in a way that is contrary to the policy or spirit of the legislation. Transactions and structures include the use of estate planning, corporations, tax havens and tax havens to generate losses that are offset by ordinary income and reduce tax debt. Philosophers have been discussing these ethical foundations for centuries and come up with three different perspectives that are worth examining in the context of tax avoidance strategies. A person adopting Aristotle`s virtue perspective could evaluate tax avoidance strategies in the context of an individual`s other virtuous behaviours. If someone avoids taxes but financially supports other institutions or organizations that are important for tax avoidance but also bring benefits to society, then the virtuous individual may view this behavior with less contempt. For example, someone may employ tax avoidance strategies and direct some of the wealth to provide funds directly to an academic health centre for cancer research. But if that person uses tax avoidance strategies in the absence of other virtuous behaviours, then tax avoidance is likely to be considered unethical. Paying an appropriate amount of tax in the countries where they operate is considered a socially responsible thing for companies: providing funds for public services such as healthcare, education and infrastructure.
These are public services from which companies benefit directly or indirectly. Some characterize tax avoidance as an immoral and unethical practice that undermines the integrity of the tax system. Therefore, whether tax avoidance strategies are ethical depends not only on an individual`s ethical basis, but also on their ability and willingness to influence others to do the same. A single tax system that treats a multinational enterprise as a single entity for tax purposes may be one solution. But until there is a legal requirement that all evasion schemes must be formally approved by the state before they are used (and not closed after they are discovered), tax entrepreneurs will have the opportunity to avoid liability. When applied to individual tax avoidance strategies, each perspective offers a unique understanding of what is right. In the UK, the introduction of a General Anti-Abuse Rule (GAAR) is proposed to prevent tax regimes that the government considers « abusive » and that David Cameron has described as « morally wrong ». However, some argue that the new law should be a more comprehensive anti-tax avoidance rule, although this raises challenges as to what constitutes « appropriate » behaviour, is subjective and difficult to define, and creates too much uncertainty for businesses. It claims to provide insight into how prominent billionaires like Jeff Bezos, Elon Musk and Michael Bloomberg use « tax evasion strategies » that are beyond the reach of ordinary people. This brief examines corporate taxation and in particular tax evasion as a business ethics issue. It deals with public attitudes towards avoidance, the concepts of justice and taxes as a social responsibility. As a researcher working on business ethics, I see these differences in how individuals perceive tax avoidance as dependent on an individual`s ethical foundations.
Ethical foundations are the principles, norms and values that guide individual or collective beliefs and behaviours. They can shape what people think is important—such as fairness, caring for themselves or others, loyalty, and freedom—and guide judgments about what is right or ethical and what is wrong or unethical. The ethos of reducing tax debt becomes problematic when it is aggressively avoided by creative plans that are not planned or approved by the state – but that comply with the letter of the law. We see here what is called « tax avoidance. » It is formally legal, but highly questionable, seriously harmful and often unethical. But despite some political rhetoric highlighting its harmful effects, it is not approached with enough rigor. The UK – which has sovereignty over a number of offshore states – has made a number of promises to tackle tax evasion – but no punitive and coercive measures have followed. Tax avoidance not only takes money out of taxpayers` dollars – which is even more relevant in times of fiscal austerity and economic uncertainty (think Brexit) – but also undermines perceived social fairness. There is an inappropriate transfer of money away from public property.
1 The tax gap covers a number of factors, such as tax evasion, mistakes, the informal economy, legal interpretation and tax evasion. In a 2012 BIE survey by Ipsos MORI, tax evasion was the second most important ethical issue deemed necessary by the British public. Tax evasion is the avoidance of a social obligation. Tax avoidance can leave a company vulnerable to accusations of greed and selfishness, damage its reputation and destroy public trust. Starbucks and Amazon, for example, have been vilified and boycotted because of their tax policies. Will Google face a similar reaction to its president`s comments? Instead of hiding behind the business case for tax evasion, businesses need to make their tax planning transparent. Businesses and government need to be more careful about communicating their position on this issue and their interpretation of the law – and most importantly dealing with it openly. This would restore public confidence and bring greater certainty to the economy. At a time when cuts in public spending are having a real impact on people`s daily lives, how can multinationals avoid paying their fair share of taxes? As Vince Cable put it, « Systematic tax avoidance by high net worth individuals and UK-based companies has a particularly ugly tone in these difficult times. » Some companies treat taxes as a question or obligation in their code of ethics (or similar guidelines). The majority are only committed to preventing illegal tax evasion and complying with the legal requirements of the countries in which they operate.
Two examples are L`Oréal and Old Mutual. Vodafone (which has been accused of tax evasion in the media in the past) has its own « tax code » which sets out its obligation to pay the legal amount required « in accordance with rules set by governments » and that it is the government`s decision to decide what is a « fair » amount of tax. However, some, such as Rolls Royce, go even further by explicitly emphasizing respect for the « intent » as well as the « letter » of the law. While there is a general public consensus on the illegality of tax evasion – the act of intentional non-payment of taxes due – there are many other differences in how the public evaluates and examines tax avoidance strategies by public officials aimed at minimizing the amount an individual pays through loopholes. A poll conducted just before the 2016 election found that nearly half of Americans agreed with Trump that it was « smart » not to pay taxes. But two-thirds said he was « selfish » and 61 percent said he was « unpatriotic. » Thus, the ethics of tax avoidance strategies depend on the ethical basis of the person evaluating such actions. « Tax avoidance » is different from « tax evasion, » which refers to a situation where a business attempts to reduce tax liability by falsely suppressing income or inflating expenses, recording fictitious transactions, etc.