On Friday evening Ben Saunders posted a really interesting reply to my post arguing the case for name and shame campaigns. If you haven’t already, you should go read it.
It’s interesting for two reasons. First, because Ben’s been thinking hard about Starbucks’ tax structure and the practical implementation of its dramatic commitment last week. Ben thinks that the tax planning jumped on by Reuters, the Public Accounts Committee and UK Uncut was actually pretty inefficient, and Starbucks could probably have been saving quite a bit more on its global tax bill. He also has some interesting things to say about what the company is planning to do now.
If I’d been UK Uncut, I’d have occupied someone else on Saturday. My own view is that, regardless of the sums involved, Starbucks has taken a qualitatively huge step by making a concession in response to the prevailing public opinion that its tax affairs were not responsible. No other company has done that, and campaigners should recognise how much Starbucks stuck its neck out. But, speaking to friends who’d been on the protests, they were looking at Starbucks’ £20m commitment in the context of all the tax it hasn’t paid in past years, rather than the next two, and taking the view that it’s too small a figure.
Saturday’s action brings us to the second interesting point about Ben’s post – the bit where I disagree with him. I think probably our disagreement explains a lot about the difference in the outlooks of tax professionals and campaigners. Ben says that when people start to boycott a company because of its tax planning:
At that point you are delivering a form of punishment for a transgression of some boundary that the individual didn’t know was there.
Sure there is no hard, tangible boundary. But Ben is responding to my post in which I argue that tax planning entails a choice, to decide how aggressive a structure to adopt, within the law. It’s not impossible for companies to ask themselves, “is this ethical?” or even, “will this look ethical when we explain it?” when setting their tax policies. Indeed, I remember the Financial Times’ Vanessa Houlder remarking at a public event years ago that, “this issue is ripe for a Brent Spar type campaign.” However fuzzy the boundary of public acceptability may be, not considering it when designing a tax structure is a choice, not an inevitability.
There’s some language a bit later in Ben’s post that I found particularly interesting:
They’ve probably paid more tax then they ought to and then been dragged before Parliament for avoiding tax.
It’s the use of the word “ought” that caught my attention. That’s a value statement,which appears to equate (1) the minimum that Starbucks could have paid if its tax planning was perfect, with (2) the amount that it’s right and proper for it to pay.
Arguably, the whole reason that we’re having this debate is that the legal framework has caused (1) to diverge too far from the public’s view of (2). I think this was a time bomb waiting to explode. I agree that defining (2) is a complex issue, but I don’t subscribe to the view that, absent a consensus on what (2) looks like, it defaults to (1).
Either the public and the tax profession need to have some serious dialogue and settle on a common view of what (2) looks like, or else (1) and (2) need to be brought closer together by tightened up the law, whether through a GAAR or through a better approach to transfer pricing.
The tax profession doesn’t seem to accept that the public opinion of how much tax companies “ought” to pay is a valid contribution to this debate. I think that’s a shame.