Is minimising your business corporation tax immoral?

Now, that’s a tough question. Among the many audiences of businesses are customers, staff, and shareholders.

Looking at shareholders first, the responsibility a business owes to shareholders is to maximise profits, which also means minimising tax liability.

Is this immoral?  Business is not a democracy, nor should morality play a part. What is important is that every business should have regard to business ethics. Businesses should trade ethically, remuneration policies should be ethically based, and they should adopt an ethical approach to paying tax on the profits on local trading.

The problem arises mostly from globalisation. Big worldwide businesses tend to manage their treasury, foreign exchange, and tax from their headquarters. In doing so, they seek to maximise the potential benefit in each these areas. Trading in many countries means these are complex activities.

What needs to happen is that an ethical approach is required in these activities, and this must include an understanding of the reputational damage when ignored. Look at what’s happened to Starbucks reputation in the UK. Reputational damage is what most concerns customers and staff, and should therefore concern shareholders. This is where the weakness lies, as I don’t think it has concerned shareholders enough.

Result, every aspect of a business is affected when ethical policies to paying local taxes on profits earned aren’t considered.

Addressing the policies of huge multinational corporations, like Amazon, requires an international response. So, well done David Cameron for putting tax avoidance on the agenda for the next G8 meeting.

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