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Responsible tax: Can pay, should pay

Guest post by Alexandra Wilson, a journalist writing for Ethical Corporation.

As tax blasts its way onto the public agenda, companies should concentrate on where they pay, as well as how much.

In times of fiscal tightening and spending cuts, all eyes turn to the question of who pays what into the public pot.

A feature on tax and ethics, published in the September issue of Ethical Corporation magazine looks at the shifting public mood on legal tax avoidance and whether companies should look again at what and where they pay if they wish to be taken credible on corporate responsibility issues.

Legality is no longer the defence that it was, and tax campaigners are arguing that companies should pay more for the benefit of the countries that they depend on.

Also, for the companies that do use illegal methods to avoid their tax burden, the costs are becoming higher as governments are less willing to tolerate it.

It is not just about paying more, but also about companies increasing the transparency of their tax paying.

Companies like Rio Tinto, the mining giant, are leading the way in publishing all its tax payments in each of the companies it operates in.

In doing this and in identifying coherent new position on their tax status, companies will be able to more credibly defend themselves against accusations of aggressive tax-avoidance.

Otherwise, they will be less able to answer the criticisms of campaigners like UK Uncut, which was able to draw half a million people out onto the streets of London to protest.

Accusations of tax avoidance will also result in bad press and possibly costly legal challenges, things any company would be sensible to avoid.

In the current economic climate, a business’s reputation for tax paying or not tax paying may be extremely important.

Going public with exactly what companies pay may silence some critics, but beware, the figures they produce may not satisfy all.

But in order to legitimately have a say in the discussion of how much tax to pay, companies need to be open and honest about their situation.

On that front, there remains a way to go yet.

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