26th November 2012

I recently received an email from a group called 38 Degrees. They are I believe an online pressure group who seek to work with their online constituency to identify areas on which they should campaign. The opening line of the email stated:

Starbucks, Google and Amazon: they are all at it. These super rich big businesses were recently dragged up in front of MPs and exposed for using tax havens and other scams to pay little or no corporation tax.

This morning in the Guardian newspaper reported that the Panorama programme on BBC had identified what they described as a scam whereby sham directors are used to set up offshore companies to avoid tax.

In both cases it has been emphasised that what these business people are doing is not illegal it is within the letter of the law, it is however alleged that it is unethical.

Of course as soon as you start using the word ethical you can be in difficulty, what is ethical to one person is distinctly unethical to others. So how do we unpick this?

I am sure that Milton Friedman that great Guru of the free market economic system would say that what these people are doing is completely ethical. They are maximising returns for their shareholders, which is their only legal and ethical purpose, and if Governments cannot close tax loopholes that is the fault of Government.

The rich would get richer, the poor would disappear into the gutter.

Another approach is to query what would be the effect of everyone following this course of action. Presumably the health service would cease to function, welfare services would be cut to the bone, community-based services would disappear, education services would suffer, the rich would get richer or at least would have more money in their pocket and the poor would disappear into the gutter.

There is fairly compelling evidence from Richard Wilkinson and Kate Pickett (1) that more equal societies are better for everyone. A more equal society is a more stable society, it sustains people who are happier and healthier and better educated. The people who run businesses are dependent upon a stable society and one where there is a good pool of potential employees who are well-educated, motivated and healthy. That's what makes for good business in what is an increasingly competitive market.

So we are in the position where certain large firms appear to be benefiting from operating in a society which is stable, where the state takes responsibility for developing a sound infrastructure, where, for example, money can be spent on flood defences for the benefit of all. Where State money is spent on health education and welfare benefits, so that these firms have a workforce which enables them to operate profitably, and indeed to have a customer base which is rich enough to take advantage of their products. It would appear however that they are not willing to assist to pay for this. So they are prepared to take a short-term advantage to the long-term detriment of society and probably their own profit margins.

I was invited by 38 Degrees to contribute to their campaign and to put forward ideas for bringing pressure on those Corporations that take but don't give. I normally resist such online appeals for help, but I do think on this occasion it is a cause worth fighting for.

(1) The Spirit Level: Why More Equal Societies Almost Always Do Better is a book by Richard G. Wilkinson and Kate Pickett, published in 2009 by Allen Lane.