The difficulty lies not with the companies, but with the politicians as it is they who set the legal framework that companies work under.

A company director has a legal obligation – fiduciary duty – to run the business in the most efficient manner possible.

Under that obligation they are required, by law, to reduce their taxation to the lowest level permissible. To do otherwise leads to lawsuits and potential disqualification as a director.

Now, accepting that all businesses fully understand what the real tax rate is going to be after exemptions etc are introduced, wouldn’t it be simpler for everyone to just drop the rate to that real rate and scrap the exemptions that artificially lower the headline rate?

You save a fortune in legal/accountancy fees and pay the same amount of tax.

Obviously there will be some who will rant that companies will be paying less tax as they only focus on the headline rate, not the real rate – but should we let the shrill idiots stand in the way of a sensible reform?

I have a real problem with insight #1: “compliance with the letter of the law is no longer sufficient …”

Why not?

And if anyone thinks there’s a problem with existing law the answer is to change the law, and not to subject companies to the vagaries of public opinion (which is one of the things the law protects us from).

See: Nicholas Shaxson’s ‘Treasure Islands’ which lays bare the full extent of tax avoidance. As he comments, ‘what is made possible becomes necessary’. It helps explain the mess we’re in, and yet it’s an issue that’s rarely discussed in billionaire-owned media outlets. Funny that.

So ActionAid would prefer not to have the rule of law? If you want companies to pay more tax, (ignoring the obvious point that it is always people who pay the taxes whether as workers, shareholders or consumers), then legislate that they must do so. Whining that companies are following the law just shows that the charities in question need fitting for a long sleeved white canvas blazer. As IanVisits says the most sensible approach, (and I think companies would be quite willing to have this as well), is to simplify the system and lower the rates.

Once again, some “right-on” lefty campaign group, in this case a “charity” decides that complying with the law just isn’t good enough in their eyes.

*yawn*

So, let’s change the music, IanVisits.

Let’s make corporate legal persona’s behave as good citizens. Make social responsibility a prerequisite of operating in this country.

Also, it’s very easy to say “abolish the exemptions”, but they often exist for good reasons. Certainly a degree of simplification can occur, but many changes will need to be closely examined to ensure there are no undesirable side effects.

Finally, we already don’t collect a massive proportion of corporate tax, and lowering the rates until we’re in a position to collect the supermajority (which means manpower, Tories) simply isn’t a good idea.

Tyler – If a corporation is acting like a psychotic, then it should be treated as one…

@leon Wolfson #6:

“Let’s make corporate legal persona’s behave as good citizens. Make social responsibility a prerequisite of operating in this country.”

So how much tax are you going to mandate that corporations pay over and above their strict legal liability in the name of “social responsibility”?

“Even Treasury Ministers are subtly acknowledging that the likes of UKuncut have shifted the debate on tax avoidance.”

Oh, and given the mendacity of UKuncut’s campaign, there is one too many consonants in the above sentence.

Robin;

You really are stuck in the concept that tax is the be-all and end-all, and that forcing companies to pay what the law says they should in the first place is a bad idea, aren’t you. Don’t you have a Tory blog to harmonise with?

@leon #9:

“You really are stuck in the concept that tax is the be-all and end-all, and that forcing companies to pay what the law says they should in the first place is a bad idea, aren’t you.”

Hardly; I am very much in favour of companies paying what the law says they should. What I’m not on board with is forcing to pay more than they are required to by law. In that, I am in the majority, according to the responses to the survey question that Sunny unaccountably failed to quote a few weeks ago. Unlike many I can, for example, see no meaning in the statement “tax avoidance should be made illegal”; because tax avoidance is paying what the law requires – but no more.

I really want to know how your proposal would work, because I can’t see it; that is not a Tory position, but a practical/legal one.

@Leon:

…and I’d comment on your claim that I’m a Tory, but my comment would quite appropriately be moderated out.

All very interesting, but how many people reading and commenting do not practice any form of tax avoidance? Even us ordinary people have allowances we can use (personal allowance, ISAs, pensions etc.). These are schemes to allow us to avoid paying tax on our incomes.

Businesses are no different, although, due to a previous chancellor, the allowances are MUCH more complicated and often open to interpretation because of poorly drafted legislation. A simplification is long overdue, and the conflation of avoidance and evasion doesn’t help.

I am not sure if there is a point to be made about taxes that organisations enjoying charitable status and by definition tax avoiding themselves are the right ones to make it. It is like the Gambino family offering advice on criminal justice.

I have a feeling that ActionAid may have missed the key point of running a business is to make a profit – and that is measured in money.

The profit can be (and often is) invested in social schemes rather than more profit or shareholders, but that is a different issue.

If you start putting social concerns (if that is what tax planning is…) before profits then your business is likely not to be successful – even ethical companies such as the Coop tend to be concerned with making money, then ask members what to do with it (wierdly, it tends to go as a dividend of sorts…).

But it is interesting that it is possible to think the problem with the tax system, the system whereby Government collects revenues under obligations legislated by government, and which is not designed by businesses (unless they happen to be consulted by compliant governments on allowances and the like – and even then it is government who have the final say), is with the businesses. If I design a system and it does not work, I tend to blame me, not those using it. If the tax system is not working, perhaps government needs to change it?

There is a basic fallacy at the heart of this argument. As a director who causes his company to pay more tax than is required does not do so out of his own pocket but is generous with the funds of others, shareholders and to whom he may be personally liable. It follows (generally) that he has little alternative but to pay the minimum required by law. If you believe this is too little then it is the law that must be changed. It’s hard to see what you hope to gain by badgering corporate taxpayers. Wealthy individuals of course have no such legal restraints on their largesse, but oddly they seem to be ignored in this campaign

Certainly a few companies make great play of the fact that they ‘do’ charities of various sorts. These tend to be the popular ones that everyone knows and they reap lots of kudos by publishing their largesse abroad. What they don’t say is that their campaigns reap other rewards such as extra tax allowances. I wonder if what they get in return is in any way equal to the cost of their good works! Or is this just sucking on the public teat of which they so much disapprove.

@13. Richard W: “I am not sure if there is a point to be made about taxes that organisations enjoying charitable status and by definition tax avoiding themselves are the right ones to make it.”

I think that you missed a few words out of that sentence. I had a look at the ActionAid web site and the campaign against UK tax avoidance, misguided or otherwise, is consistent with the organisation’s priorities.

As a charity, ActionAid is exempt from VAT. That means that ActionAid cannot be accused of VAT avoidance.

“As a charity, ActionAid is exempt from VAT. That means that ActionAid cannot be accused of VAT avoidance.”

I would have thought it meant precisely the opposite.

@16. Christine Bergin: “What they don’t say is that their campaigns reap other rewards such as extra tax allowances. I wonder if what they get in return is in any way equal to the cost of their good works! Or is this just sucking on the public teat of which they so much disapprove.”

It depends. 30 odd years ago when Apple gave computers to American schools ($500 manufacturing cost, and thousands were given away), it was both a philanthropic gesture and a marketing exercise. Today, if any company gives physical stuff away, assume that it is cheaper overall to give it away than to sell it in the surplus channel. There are a few exceptions; companies will always do deals with universities and voluntary organisations in exchange for a case study.

@18. Jimmy

Assume, Jimmy, that you are immune to the measles virus family. It means that you are exempt from infection. So when your niece becomes infected, you don’t need to avoid her because you will not fall ill.

So when UK charity law defines that some charity work (1) is exempt from VAT, it is not avoidance. Law has determined that those charitable activities are immune.

I register (1) as a question for more knowledgable people. Are there any activities that are legitimate for a charity that challenge tax status?

@Charlieman #20:

So when UK charity law defines that some charity work (1) is exempt from VAT, it is not avoidance. Law has determined that those charitable activities are immune.

But charitable exemption from VAT is dependent upon registration with HMRC as a charity. Why is registration as a charity not therefore tax avoidance? Nobody registers with HMRC as a charity unless they want to get a tax-saving.