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BUSINESS
FISCAL AFFAIRS
Text by STEPHEN EVANS
Photography by MIKE ZENARI
WHAT IS A “FAIR” TAX SYSTEM? Is it unfair that multinational companies are able to create international structures to avoid paying tax when small, single country firms can’t? Is it fair that governments take money away from businesses that are providing jobs and producing products people need and want? What is the morality of taxation?
M
agali Paulus, a spokeswoman for the advocacy group Tax Justice Lëtzebuerg Collective, said: “The notion of fairness comes from the idea that everyone should be taxed in a similar way according to their profits and wealth.” “If there are changes to the tax system to stop activity that is perceived to be unfair, then multinational business will change their behaviour. But this debate needs to be based on efficiency rather than the moral swamp of trading people’s different views of morality,” argued Keith O’Donnell, the managing partner of Atoz Tax Advisers Luxembourg. LuxLeaks, the Panama Papers, and the recent Paradise Papers highlighted the extent of global corporate tax structures, causing a storm in the press and calls for action. They often highlighted businesses making the most of their sales and profits in large countries, but then moving these earnings through smaller, low tax international hubs. Yet despite the thousands of pages of data, they revealed almost no criminal activity, and nothing illegal happening through Luxembourg. “Luxembourg is certainly not the worst, but the point is we all benefit from services provided by the government and this means tax has to be paid,” Paulus argues. She believes businesses should have a wider res ponsibility to do the right thing for Winter 2018
KEITH O’DONNELL Companies create jobs
society. Businesses benefit when their staff are healthy and well-educated thanks to state-run systems, when transport networks work efficiently, and when crime is controlled by public law enforcement. Taxes are needed to make those work. However, isn’t the number one responsibility of companies to work in the interests of their owners? After all, this is how individuals behave. Also, businesses have a duty to staff to remain economically viable so they can continue to pay salaries. Moreover, corporations make a major contribution to public finances by employing people whose incomes
are then taxed, with sales taxes levied on the products they produce. In addition, withholding taxes and income taxes are paid when profits are distributed to businesses’ owners, or in other words when dividends are paid to shareholders. More often than not, multinationals are mostly owned by pension funds and insurance companies. Thus public and private retirement schemes and insurance policies rely on investments made into private companies.
WHAT DOES FAIRNESS MEAN? So what is “righteousness” and “fairness” when discussing economics and