Tuesday, February 03, 2015
You may not like it but tax avoidance is good business.
The Pension example is one of thousands illustrating that big Corporations have to be tax efficient, and have the ability to be so. That ability comes from that big Tax Division whose brief is, of course, to minimise Shell's tax obligations. Some profits are deliberately made in low tax locations rather than high tax. Some businesses are deliberately located in low tax countries rather than high tax. And so on. Sometimes it's much cheaper to do business in one place rather than another and Shell, and the rest, have an obligation to respond to this. Who is the obligation to? Well the owners of the Corporation of course - including institutional investors. Why pay tax if you don't have to?
Those that levy tax certainly have their work cut out to apply the law when in the big Companies there are top tax lawyers trying to beat the system! The search for tax loopholes which lead to the avoidance of tax liability is part art and part science. It's clever stuff, but there is nothing illegal about it. It's up to the authorities to close the loopholes not to businesses to pay taxes when they are not obliged to. Labour leader Ed Millibsnd said this about the Boos of Boots:
"I don't think people in Britain are going to take kindly to being lectured by someone who is avoiding his taxes..."
Aside from the personalisation (it's the Company not the individual) I'm afraid Ed just doesn't get it. Ever day thousands of British businesses and their advisers and lawyers are working hard to avoid paying taxes. They are not evading them (which would be unlawful) but avoiding them (which is good business). It is utterly naive to imply that companies should voluntarily pay taxes when they don't have to.