Tax self-righteousness
For a while now, every time I mention companies like Google, Amazon, Facebook, Microsoft, Uber, and others, a number of readers comment on these businesses’ tax practices and the supposed advantages they enjoy as a result of not paying tax in Spain, instead doing so in low-tax jurisdictions.
Let’s be clear about this: all companies and individuals do what they can to apply what we might call “fiscal optimization”. I write this in speech marks for a simple reason: it’s a EUPHEMISM, and what a euphemism. Everybody, and I mean everybody, “optimizes” their taxes so as to pay as little as possible. All companies do their best to avoid paying taxes; what’s more, the system is designed to encourage this: there is a legal framework, and everybody abides by it. Sometimes they enter what might be called grey areas, and then must account for their actions if their books are inspected.
No company, given the opportunity, would pay more tax than the amount stipulated by law, and no company has ever said: “We’re going to pay more than we’re required to, because we want to help the country.” If there is a way to pay less within the boundaries of the law and does not involve establishing higher tax contingencies, then that way will be taken. Furthermore, if companies didn’t do this, the shareholders would soon make their feelings felt. Optimizing tax payments is not some kind of “ethical dilemma”, nor is it shameful or disgraceful: the system is simply designed in this way. We can criticize our tax systems, we can ask for changes to the rules, but it is not fair to insult those who pay less tax, as long as they do so within the law.
I really am starting to tire of this “tax self-righteousness” every time I mention certain companies: the idea that they don’t pay their taxes is just plain wrong and contributes nothing to the debate.
In other words, let’s accept that Amazon, Inditex, and thousands of other companies around the world, optimize their tax affairs, in just the same way that some couples decide to file a joint or separate tax return, depending on which is most beneficial. We all do it. If you are a company with subsidiaries in different countries, your chances of optimizing your taxes improve; this doesn’t make you a thief.
If you want to be in a position to do this, then you will have to grow your company, and expand into new territories, you will have to hire tax experts, and you will have to come up with a design that the tax authorities in different countries are prepared to accept.
There are companies that use exemptions and tax breaks as part of the structure of their comparative advantage and to attract investment, to encourage the growth of certain companies, to create a certain industrial base… and as long as they do this within the relevant international laws, and are not sanctioned for their practices, then they are clearly acting within the law. International pressure might, at some point, have an impact on the tax strategies of certain countries, as it just happened to Ireland, but these events happen once in a blue moon, and in the context of a very complex political and economical context. The idea that we are going to turn our backs on countries with low tax rates, which are perfectly legal under international law is absurd, and criticizing those who use the law to their advantage is just downright stupid.
So, can we please stop this absurd self-righteousness about supposed tax evasion? Taxes, like death, are largely unavoidable, which doesn’t mean that we won’t do our damnedest to put them off.
All we can ask is that optimization is carried out within the law. If companies don’t optimize their taxes, then the shareholders will make them. If we think that some companies are taking excessive measures to reduce their tax burden, even if they are doing so within the law, then we have to change the law, either that, or stop complaining. There really is no point in bringing ethics and morality into something that was never designed with them in mind.
Two interesting readings on the topic:
(En español, aquí)
