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Responsible Tax: Making 2018 a Year of Action

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5 minute read

Notes from the celebration of the Jericho Chambers E-Booklet, Responsible Tax and the Developing World, held in January 2018.

Below is a summary of a panel discussion with Jane McCormick, Global Head of Tax, KPMG, Maya Forstater, Visiting Fellow, Center for Global Development, Christine Allen, Director of Policy and Public Affairs, Christian Aid, chaired by Neal Lawson, Jericho Chambers. Under the Chatham House Rule, the group talked about foundations for future work, and how to make 2018 a ‘Year of Action’ for the Responsible Tax initiative. The main action points are listed below. 

Key insights

  • Tax is a legal duty but has a moral dimension.
  • Myths persist. A more factual debate on tax is needed, though “storytelling” will always remain part of the emotion of tax.
  • A more responsible media discourse is desirable, especially in UK.
  • A new global tax ecology is a desired outcome – the Responsible Tax movement is a first step towards this goal.

  

Build dialogue and consensus for a better system

The Responsible Tax project started in 2015. It operates on the premise that tax is the entry fee for a civilised society. It is underpinned by a robust framework of Responsible Tax principles.

While tax regulation has become ever-more complex, the last two decades have moved us further and further away from a general consensus on who pays, where, how much and what is fair. KPMG employs 45,000 tax specialists in 155 countries, dealing with ever-expanding tomes of rules. If tax professionals struggle to understand legislation, what hope for non-specialists?

It is a significant achievement that people representing international organisations, NGOs and corporates have collaborated in the process of both building an embryonic global responsible tax network and on this publication, and are sitting together on a panel, discussing what constitutes a fair tax regime for the global North and South. No one would have expected this a few years ago. The upshot of conversations like these is deepened consensus and dialogue around responsible tax practice.

 

Bust Myths

Following Davos, newspapers are awash with ‘headline stats’ on the state of the world.

As Maya Forstater argued in her contribution to the booklet, the Responsible Tax debate requires us to probe, explore and unravel facts and figures, avoiding the use of headline-grabbing numbers for mud-slinging purposes. The discussion focused on three themes currently dominating dialogues on tax.

  • Tax loopholes have created a hidden pot of gold, capable of solving the world’s development problems.
  • The international tax system is broken.
  • Tax is political.

The “pot of gold” narrative is perhaps the most pernicious – peppered with ‘facts’ like ‘unpaid tax is 3 x international aid’, or ‘Zambia loses £3bn to tax avoidance’.. However many times you whack it, it just won’t go away.

To ‘mend’ the international tax system we need to concentrate on constructive, incremental changes in how tax is levied, and how to implement these taxes. Similarly we can replace blanket statements about the political nature of tax with actions to nurture better understandings of tax policy and the role it plays.

 

Restore trust in the system

If we are to contribute constructively, everyone needs to feel part of the debate, and part of a coherent ecology of tax.

People feel global and domestic financial systems are not working for them, and that they lack adequate voice or representation. Rightly or wrongly, popular anger is largely focussed on tax and those that are alleged to avoid/evade it at a local and global level.

In developing countries. many associate tax payments with another layer of 24-carat gold-plating on a government official’s bath taps. For the responsible tax movement to gain further traction, we need to build trust in the system. This is why NGOs’ role is so important in the tax debate.

Interventions from international organisations, even if well-intentioned, eg the BEPS initiative, are not on their own enough to solve the problem, seen by many as an imposition benefitting the developed world, or the preserve of elite committees in Paris. For many, tax is as simple as ‘What do I pay?’ ‘What do I get?’

 

 Fight for more honest story-telling around tax

Tax might be described as a legal duty – with a moral dimension.

For many tax professionals, tax and and morality are traditionally akin to oil and water in terms of how well they mix. Morality is largely absent from tax exam curricula. The perception of tax as ‘something to be avoided’ has ruled discourse until relatively recently – hence the expression ‘tax relief’. Change this perception, and a better dialogue results.

We need to move from the ‘how-low-can-you-go?’ limbo of compliance culture, to a culture of compassion and inclusion. Recognising the intrinsic link between tax and morality is actually what will help repair the system. Going one step further, looking at tax through the lens of faith, tax is what moves you from being an individual to being part of society. The success of a tax policy is the extent to which is affects the social contract.

The media has a role to play here. In the UK, governments spends tax, in relative terms, reasonably wisely. HMRC collects tax in a diligent and reasonable way, yet journalists would have us believe otherwise. The media would play a more useful role shedding light on the intricacies of tax questions – who pays it, how it is spent – laying the foundation for a social contract by introducing such complexities to the level of public debate. A more responsible media discourse is needed.

 

Make 2018 a Year of Action

Since its inception in 2015, the Responsible Tax project has succeeded in convening a meaningful debate between business, government and civil society on tax as a tool for social good. Building on this basis, 2018 can be the year of action in which we begin to arrive at answers about what we tax, how and where in the context of a globalising world.

We need to enlist sponsorship from those right at the top of the business world, from governments, from civil society and from institutions – all committing to help tax for sustainable and just development. Together, we can be the change.

 

Further reading:

 

A copy of the E-booklet can be downloaded here.

 


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