Thinkers from Immanuel Kant to John Rawls have offered what has been called the deontological argument. This emphasizes ethics based on adherence to rules, regulations, laws and norms. Meanwhile, utilitarian philosophers such as John Stuart Mill and Jeremy Bentham put forward an argument that recognizes the costs and benefits, or even trade-offs, in pursuing what is right.
Under this belief system, called consequentialism , behaviors are ethical if the outcome is beneficial to the greatest number of people, even if it comes at a cost. A third perspective comes in the shape of what is called the virtue ethical foundation that is associated with Aristotle and other Greek philosophers.
In this way, ethical behavior is that which enables the individual to achieve his or her most excellent moral self. When applied to the tax avoidance strategies of individuals, each perspective offers a unique understanding of what is right.
As long as an individual follows the tax code, and acts legally, the tax avoidance strategies are likely to be viewed as ethical. In contrast, a consequentialist is likely to evaluate tax avoidance strategies by also looking at how those taxes could have been used to benefit society — by paying for schools and hospitals, for example. When one individual — be it Trump or any other person — avoids taxes, it increases the costs experienced by everyone else while also decreasing the benefits experienced by society as a whole.
Starbucks and Amazon, for example, were vilified and boycotted as a result of their tax policies. Will Google face a similar backlash after their chairman's comments? Paying a fair amount of tax in the countries where they operate is seen as the socially responsible thing for companies to do: providing the funds for public services such as healthcare, education and infrastructure.
These are public services which companies benefit from either directly or indirectly. Tax avoidance has been branded by some as an immoral and unethical practice that undermines the very integrity of the tax system. Company directors argue, however, that their responsibility is to maximise the value that they deliver for their shareholders and that includes keeping tax costs to a minimum within the realms of what is legal.
Aside from corporation tax, businesses should be acknowledged as contributing to the economy in other ways. In the UK they pay PAYE, national insurance contributions and business rates, while in other countries they can contribute through agreements to pay infrastructure costs. Many multinational companies, apparently operating very successfully in the UK, are paying little or no local corporation tax. Corporation tax is a tax on profits, so if a company makes no profits, it should not have to pay corporation tax.
The issue is whether the profits are calculated correctly and there is much confusion between the two. It is plausible that a company that has high sales but pays no tax may be making no profit, although it would be wise to question how those profits were calculated.
The public expects businesses to pay their fair share of tax, but what constitutes a fair amount is subjective. In , HMRC declared that "we want to make sure that the burden of tax does not fall unfairly on taxpayers who play by the rules and pay their fair share", but it gives no definition of what is to be regarded as fair.
It is intended to prevent those tax schemes that the government deems to be abusive and which David Cameron has described as "morally wrong". But legislation that centres on ideas of what is "reasonable" behaviour is still too subjective and difficult to define.
What businesses most want out of a tax system is certainty — they want to know what their tax bills will be so they can plan their strategy and investments accordingly.
It seems very complex given what you want to do. There are guaranteed returns with apparently no risk. There are secrecy or confidentiality agreements. The scheme is said to be vetted by a top lawyer or accountant but no details of their opinion are provided. The scheme is said to be approved by HMRC it does not follow that this is true.
Taxation of income is delayed or tax deductions accelerated. Tax benefits are disproportionate to the commercial activity. Offshore companies or trusts are involved for no sound commercial reason.
The involvement of professional trustees is claimed to guarantee that the arrangements succeed.
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