What is the ethical issue?

Countries set out in law how their taxes should apply and businesses are expected to pay their taxes due under the law. But tax avoidance is an ethical issue because organisations have a choice about their approach to interpreting the law and how that translates through tax planning into the tax they pay. Whilst remaining legal, where a business draws its ethical line regarding how to interpret the tax laws is a matter of discretion.

Tax avoidance is a grey area, as it often refers to legitimate but aggressive use of financial instruments to obtain a tax result not intended or anticipated by the government. One example is the use of overseas tax havens.

Tax avoidance is seen by many as not operating within the spirit of the law and has been branded by some as an ‘immoral’ and unethical practice that undermines the integrity of the tax system.

Tax evasion is illegal.

 

IBE Guidance

A summary of good practice
  • Organisations need greater internal engagement around the decisions and circumstances behind their tax policy and the stance they take.
  • In the UK, if a company is a certain size (turnover above £200 million, balance sheet of over £2 billion) it must publish annually its tax strategy. 
  • This then needs to be communicated externally, explaining the business decisions that have led to where and how much tax has been paid. This transparency is helping to restore trust with the public.
  • It is good practice for all other organisations to have a clear and transparent statement regarding their position on the payment of tax, guided by their ethical values. 

 

Further resources

Blog

#PandemicAndBeyond - 20:20 Hindsight

In the first blog of the series, Pandemic and Beyond: the ethical issues, Mark Chambers, IBE’s Associate Director (Governance), introduces the series and reflects on the year so far.

02 September 2020

Publication type: Business ethics briefing

Business Ethics in the News 2019

This briefing provides an overview of the ethical concerns and lapses that were recorded by the IBE in its monitoring of media coverage in 2019. It gives an overview of which sectors and issues related to business ethics were most covered in the news. For 2019, we have recorded a total of 361 different stories involving lapses of companies with a UK presence.

29 January 2020

Publication type: Survey

Attitudes of the British Public to Business Ethics: 2019

The 2019 results of the IBE's annual survey of the attitudes of the British public to business ethics.

17 December 2019

Webinar

What are the hot ethical topics E&C practitioners need to know?

03 June 2019

Publication type: Other

A Year In Review: Ethical Concerns and Lapses 2018

Read the IBE's annual analysis of business ethics news stories from the last year - which were the sectors and issues most in the news in 2018?

30 January 2019

Publication type: Survey

Attitudes of the British Public to Business Ethics: 2018

The 2018 results of the IBE's annual survey of the attitudes of the British public to business ethics

13 December 2018

Publication type: Survey

Attitudes of the British Public to Business Ethics: 2017

The 2017 results of the IBE's annual survey of the attitudes of the British public to business ethics

12 December 2017

Publication type: Business ethics briefing

Tax Avoidance as an Ethical Issue for Business

This briefing explores corporate taxation and specifically the issue of tax avoidance as a business ethics issue. It looks at public attitudes to avoidance, concepts of fairness and tax as a social responsibility.

17 April 2013