Tax: Evasion or Avoidance

Friday 6th October 2017
How to save: Luxembourg & Amazon

In response to the news that the EC (European Commission) has ordered Luxembourg to recover €250m from Amazon in back-taxes, Arvind Lall, (below right) lecturer in taxation and ethic at the at the University of Kent Business School comments ‘Governments find themselves in a difficult position in a free trade global economy where they have to balance encouraging, large multi-national companies (MNC’s) to invest in a country, with the freedom to choose their trading structure and arrangements to optimise profits if they so wish. Tax avoidance, as we know it, is perfectly legal, but is it moral? And can the state find itself being complicit in short-changing the public?

‘Commercial decisions seem to be driven firstly by legal commerciality, but it seems that the EC has found a way of pointing the finger at Luxembourg where the arrangement with Amazon was “illegal under EU state aid rules”. The Commission also plans to take Ireland to court to collect back taxes from Apple.

‘It seems that once the state is involved in encouraging trading then the (democratic) state needs to ensure, not just a legal but also, a fair and just society, and these two responsibilities run closely together. Corporations may also be seen as ‘citizens’ who have a duty to society, a kind of unwritten social contract. After all, it is from the society that they make their profits.

Many now talk about the Triple Bottom line (economic, social, environmental) which expands the single economic duty of maximising profits at all cost to include a ‘fair’ contribution of tax. The public now probably see MNC tax avoidance as simply bad manners, as smaller companies do tend to pay their fair share.

‘What appears to be the case here, is that unusually both Luxembourg, as the state, and Amazon appear to have fallen short of doing the ‘right thing’ and interestingly the state which challenges MNC’s on behalf of society, is itself being challenged.

‘Whilst we do not know the outcome of the case yet, this move on Luxembourg may make other EU states look closely at their duty to the public (purse), in case state aiding of tax avoidance becomes illegal, notwithstanding the moral question, of course.’

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