The (Im)morality of Tax Avoidance 2

In the last post, the Sage lamented the limited power of governments over big business – unless they were globally united in purpose and action (and when did that ever happen?) – but also suggested a justification for tax avoidance, citing a company’s obligations to its shareholders.

Alongside those shareholders, couldn’t customers also be added to the list of those culpable for providing the incentives for corporations to act (and continue to act) in the way they do?

Take Amazon, for example – it may have received a fair amount of bad press recently, but if a book or DVD, say, were found to be substantially cheaper on its website than in a rival store, where would most people choose to make their purchase?

In most cases, until managers have a very good reason for implementing a policy that would have a negative impact on their bottom line, it would be irrational for them to do so. That reason may be legislative change – but large organisations don’t employ specialist legal and tax advisors for nothing; there will always be ways of getting around even the best-laid plans of politicians.

But if a company’s foot-soldiers – its customers – were to vote with their feet, sales would fall, profits would dwindle, investors would flee... and chairmen would have nightmares. The only problem is that – just like with world leaders – that kind of universal harmony is never going to happen either.

And it isn’t for the lack of trying. Remember the days when G8 summits had their headlines hijacked by anti-globalisation protestors filling the streets with their hatred and violence (donning T-shirts and gadgets made on the other side of the world, naturally)?

Remember the Occupy London camp that parked itself outside St Paul’s for a few months last winter, to show supposed unity between workers and the unemployed, from all backgrounds, against the evil corporate machine? You know, the one whose members interrupted their solemn meditation to do another day’s work on behalf of people they didn’t know, or to return to their warm, mortgaged home for the night?

Is it any wonder that the corporate behaviour that so many claim to revile continues so relentlessly when efforts to stand up to it have so often been undermined? And well they might be, because the actions of these outspoken critics are themselves purely rational.

Just as the boss of a listed company must uphold the interests of his business and his shareholders, the ordinary man on the street is bound by similar obligations to himself and his family. And, ultimately, if he had a clear opportunity to make himself and his dependants better off without breaking the law, he would surely choose – indeed, be obliged – to take it.

So perhaps the discussion should focus less on the morality of tax avoidance, which leads people to expect others to take actions based on their own subjective values, and be directed more towards finding ways of shifting the balance of incentives.

Gestures like empty diplomatic statements and fickle, forgotten protests make no impression whatsoever on this landscape, because those on the receiving end of them know that those making them have at least as much to lose from putting their money where their mouth is.

So the next time you’re sat in a Starbucks branch that you found on Google reading a Kindle book that you found by reading Facebook on your iPhone, ask yourself who’s really winning.