Paying tax is often portrayed as a negative thing, yet tax is the life blood of successful democracies. Tax is at the heart of the way people and the state interact with each other, and a fundamental way in which we can promote a more equal society. It oils the wheels, generates the funds necessary for the state to provide for many of the population’s fundamental human rights. Progressive taxation is one of the ways in which a society can share the burdens, duties and responsibilities to provide for the resources for the common good. Tax is important.
To me, the common good goes beyond utilitarianism. It is the expression of that which brings a society together. The management of tax, and indeed the public finances as a whole, enables a society to express its ethics and the common good. This makes it a profoundly moral issue, not just a question of financial practices. So it is no surprise that a nerve was hit when, on 12 November 2013, in a UK Parliamentary hearing on tax avoidance, Margaret Hodge (Chair of the Public Accounts Committee) told Google’s vice president for Europe, “We’re not accusing you of being illegal, we’re accusing you of being immoral.”
The idea that tax payment may have a moral dimension sits uncomfortably with many people in the corporate and tax professions, even where they may be sympathetic to the need for change. But it is – like fairness — an idea that makes sense to the public, and is the motivation for many of those that campaign for tax justice.
This moral framing is behind a growing sense of expectation about the tax affairs of large companies and wealthy individuals. It is more than a politics of envy. It is a feeling that those companies or individuals not paying their fair share of tax are not playing fair and not contributing to the common good. Businesses have to understand the reasons for this different framing of the tax debate if they are to respond effectively to the growing public and political concerns. This view is not anti-business or anti-wealth – rather it makes a distinction between what is legal and what is right.
Christian Aid has been a leading voice challenging tax evasion and avoidance, especially as flawed tax systems mean the impacts are felt in developing countries. Rooted in Christian faith and traditions, Christian Aid is not shy of discussions on morality. We aspire to be a prophetic voice that challenges human excess in a world increasingly dominated by a culture of materialism.
We see that the unfair tax systems and rules developed over the past four decades at both international and national levels have contributed to increased inequality within and between countries. Wealth and power are being increasingly concentrated, gaps in inequality are rising and this begins to threaten our social fabric and human relationships. Such systemic inequality threatens the very fabric of the common good. It also challenges the business environment too, which some have begun to realise.
It is clear to us that the outcomes of tax decisions have a moral dimension. But of course the tax system itself is extremely complex and the links between cause and consequence are tangled and unpredictable. It is often not difficult to identify where things just feel wrong. So:
It feels wrong when… Low Income Countries are collecting less than half the amount of tax, as a percentage of GDP, than High Income Countries but the rich countries get to set the rules
It feels wrong when…the system of tax rules and practices in many rich countries undermines the ability of poorer countries to collect the taxes they desperately need
But it is not always so easy to turn this on its head and decide what feels right. Accepting the payment of tax as a moral, rather than just legal, obligation does not in itself create solutions. In seeking agreement around an ethical code there is a need to examine the consequences of an act — specifically whether it causes harm to another. Determining the full consequences of an act is not always easy. For instance, companies often perceive a conflict between the outcomes of their decisions for shareholders and the outcomes for wider society.
Making the assumption that tax payment is essentially an act of moral obligation may help to guide discussion and simplify the choices. Rather than seeing the legal code as an opportunity to seek and exploit loopholes, the starting point might be to question a potential course of action in terms of whether or not it is, or would be perceived by others, as an honest contribution to the well-being of society, the enhancement of relationships in society and the common good?
Many businesses understand that today’s debates are not about whether change should take place but how. The moral implications of business taxation decisions is critical dimension in thinking about how to respond to the challenge.
Christian Aid is publishing a report ‘Tax for the Common Good’ on Tuesday 21 October, 18:00 at St Mary le Bow Church, London. There will be a keynote address by The Most Rev Rowan Williams and presentations from the authors of the main papers. Contact Geoff Daintree for further details email@example.com.
 House of Commons International Development Committee, Tax in Developing Countries: Increasing resources for development, Fourth Report of Session 2012–13, 16 July 2012, p5.
Christine is Director of Policy & Public Affairs at Christian Aid.