The only things certain in life are death and taxes

In an age where emphasis is placed on improving turnover and reducing costs, it is no wonder many organisations have begun to view tax as an expense they can reduce. Tax is a legal obligation and whilst tax evasion is illegal, tax avoidance is not. The key debate is whether organisations are acting ethically by using tax avoidance schemes.

Margaret Hope (Chair of the Public Accounts Committee) argues tax avoidance is "completely and utterly immoral", a view echoed by much of the media and British MPs. Whereas, Eric Schmidt (Google's Chairman) is proud of his company's avoidance and argues they acted within the rules set out by governments. So, who is right? As with any ethical dilemma, this is a difficult debate and depends entirely on what the observer of the activity believes is legitimate behaviour.

It was once said that "the only things certain in life are death and taxes", although this quote was aimed at individuals I believe the meaning still stands with organisations. Tax is a legal obligation and is something no one can avoid. We as individuals are required to pay tax upon our earnings, value added tax (VAT) is included in the majority of our purchases and business are required to pay corporation tax. It's safe to say that at some point in your life you're going to pay tax. But, who's to say that you shouldn't try to minimise the amount you're paying? That I believe is the real issue. We can argue all day about whether tax avoidance is immoral, but we wont resolve the dilemma unless we adress the fundamental problem, and that is how do we stop tax avoidance from happening? 

Since the announcement at the end of 2012 that Starbucks, Google and Amazon had all used tax avoidance schemes to improve their financial positions, the need for combatting the issues has become apparent. Unfortunately, this is not something that can easily be done by one government alone and is why the G20 committee have convened this week to come up with a global strategy for resolution. But how easy will this resolution be? In my opinion, not very.

The underlying issue is the irregularity of tax rates across the world. The UK has a corporation tax rate of 26% (2012), whereas companies in Ireland pay just 12.5% (2012). In the USA corporation tax is 35% (2012), whilst the Cayman Islands have a tax rate of 0% (2012). It is this range of tax rates and an increasing ease to set up companies abroad which has led the way for tax avoidance. And although the resolution seems simple, setting one standard tax rate for all countries across the world is not an option. Doing this will only result in damaged relations and reduce the ability for organisations to trade and develop internationally.

I personally don't believe tax avoidance is immoral. If an organisation is playing within the rules then I do not see why an organisation should not be able to exploit these. However, it is very likely that Google, Starbucks and Amazon will not be the only companies criticised by the media over the next 12 months for using tax avoidance schemes and to ensure that some tax is payed into the UK economy I definitely agree that something needs to be done to combat the issue. What that something is, I do not know. That is in the hands of the G20 committee, and is a piece of news I look forward to reading.