Why I don't agree with UK Uncut's critics
Guest blog cross-posted with permission from Martin Hearson
In this post, I’m going to let you into a little secret about tax avoidance campaigners. But I’ll come back to that in a bit.
In a week bookended by the Public Accounts Committee’s criticism of Starbucks, Amazon and Google, and UK Uncut’s planned action in Starbucks stores, the usual criticisms of ‘name and shame’
campaigns have been given an airing. Today I want to address a couple
of them, to explain why I believe that the campaigns run by NGOs or by
grassroots activists are valuable.
First, there’s the argument that what’s happening is a ‘witch hunt’, based on ‘understandable misunderstandings’. I certainly think in the last few months what we’ve seen might well count as a ‘moral panic’,
and it’s inevitable that during such periods of intense speculation,
some individuals will be caught up unfairly in the whirlwind of
allegations. We saw this in this season’s other big moral panic, the
child abuse scandal.
The big false allegation
in the wake of the Jimmy Saville allegations did, however, demonstrated
one point that I think the critics miss. Few NGOs or newspapers are
able to publish allegations without an intense process of libel
checking. In my own experience,
we kept a large dossier of evidence, which was never published, and
spent days before publication cross-checking the specific wording of
each allegation we were making against this evidence, on the advice of
our libel lawyer. The same process then happened again when the allegations were reported in a newspaper,
only this time with the company concerned making very specific
challenges to some allegations, which again had to be matched by our
evidence, or withdrawn. All of this is with good reason: when the Guardian published in correct allegations against Tesco,
the supermarket sued. Starbucks et al might have chosen to do the same,
if there were a solid error of factual or interpretation in the stories
This is not to say that mistakes don’t slip through the net, and of
course it doesn’t allow for how people and organisations without such
checks and balances have a tendency to strip away the nuance as they
regurgitate the main points of a story. As I’ve said before,
I do think that campaigners and journalists – who have the time and
resources to check things out – have a responsibility to review others’
allegations critically, rather than jumping on any example that suits
The taxpayer’s choice
So sometimes there are actual mistakes. But when critics from within
the tax profession point out that many of the examples that have caught
the public imagination are actually genuine compliance with both the
spirit and the letter of the rules, I don’t think that’s quite the same
thing. A thoughtful paper from some of the folk at the Oxford University Centre for Business Taxation [pdf] makes a helpful distinction between three types of practice that are often unhelpfully bracketed together as tax avoidance:
- A. Ineffective avoidance, which can be prevented through the courts provided it is discovered and action is taken.
- B. Effective avoidance, which can’t be prevented in this way because
it results from “a defect in the legislation or other failure in the
way the legislation is written.”
I like this distinction. I agree with the authors that the question
of the amount of tax ‘due’ is not a moral issue: expressed in this way,
the ‘right amount of tax’ is a point of law and is only a concept
relevant to the first two categories. I also think they’re right that,
regarding the third category, “If current law cannot stop the behaviour
in question, there may be a need for legislative change.”
- C. Using legislation or the international tax system to one’s
advantage in a manner which may result in a very low tax bill, but isn’t
tax avoidance as such.
But here’s where I disagree. The paper argues that there is no moral
dimension to the third category either, except at the level of
determining the legal framework for tax:
If the behaviour falls within C, but is considered to be
undesirable by the government as advised by HMRC, political groups or
others, then the answer lies in policy change and political action, but
not criticism of the taxpayers concerned who will have complied with the
When arranging their tax affairs, multinational companies (and many
individuals, for that matter) are faced with a range of options as to
how ‘aggressive’ they wish to be. That’s not just a matter of how much
they want to push the legal boundaries, it’s also a question of how they
want to operate within them. And insofar as a company makes a choice
such as this, I think it’s perfectly fair comment for campaigners,
parliamentarians and the public at large to criticise decisions with
which they disagree. Indeed precisely because category C practices are
not a matter of legal compliance, it is all the more important that they
are parametrised by a moral framework.
The mechanism of change
As I noted above, I do agree with the critics, including those behind
the Oxford paper, who argue that naming and shaming is not the best way
to deal with the root causes of practices in categories A, B or C.
Because in each case, the root cause is a matter of tax policy or
And here’s the secret I promised to divulge: I don’t think that any
campaigning organisation that produces or acts on a corporate tax exposé
does so because it sees itself in the role of some kind of backstop to
HMRC. What NGOs and UK Uncut have in common is that they see the primary
problem as the law, and the primary solution as a change in the law.
It’s just that case studies of well-known companies are the single most
effective way to generate pressure for that change.
But isn’t it unfair to single out particular taxpayers, if what you
really want is a change in the law? I don’t think so. Firstly, because
in a good case study, the company concerned has made a clear choice.
That may not be a choice to ‘avoid’ the tax that is ‘due’, but it’s
still a conscious choice to arrange its affairs in a manner that results
in it paying less tax than it otherwise would. That’s even true if the
decision was to apply for an elective tax incentive, or to arrange the
actual economic substance of its operations on the basis of tax
I also think there’s a second justification, which is that companies
aren’t merely passive rule-takers. They’re intimately involved in the
tax policymaking process, whether at the OECD or in the UK Treasury.
It’s surely good that taxpayers are consulted in the development of
rules that affect them, but I also think there’s some truth to the view
that tax lobbyists at times cross a line into having too much influence.
Business is working hard to influence the current review of transfer pricing of intangibles at the OECD; recent reforms to the UK’s CFC anti-avoidance rules were developed hand-in-hand with business
and following a lot of lobbying. The argument that taxpayers can’t be
criticised for merely complying with the law falls down a bit when they
were instrumental in its design, too.
Treasury minister David Gauke’s past remarks
indicate that he sees the need for government, business and HMRC to
work together to counter the moral panic on tax avoidance. For me, the
most interesting occurrences of recent weeks are the examples that show
that this united front is failing. Not only have government ministers spoken out to criticise companies, but both Starbucks and Sainsbury’s
have broken ranks: one by making what has inevitably been seen as a de
facto admission of guilt, rather than sticking to the defiant line that
other companies have held to under fire, and the other by trying to
position itself as somehow morally superior to its competitors on the
basis of its tax payments.
These moves are interesting not because they suggest that companies
might start behaving differently, but because they demonstrate that our
tax rules are failing in an important way: they are failing to offer
sufficient cover to under-fire businesses. That will surely be an
important driver of change in those rules: exactly what campaigners are
trying to achieve through their corporate exposés.