Business ethics: tax evasion

Here’s another business ethics example to think over. It’s attracted lots of media attention (not all of it justified) in recent weeks. But it’s worth reflecting that on average, over the last few years, there have been 250 annual prosecutions for benefit fraud (which costs about £1bn a year). There have been roughly 50 annual convictions for tax credit fraud (which costs about the same) but there have been precisely 0 convictions for tax evasion using offshore accounts (which costs vastly more than all forms of social security fraud put together).

Do UK firms have an ethical case to answer?

Topshop’s flagship London store was hit by a protest as campaigners against tax avoidance by big business forced the store to close temporarily, with protestors taking action in 21 towns and cities in the busy run up to Christmas. Campaigners are also protesting against Boots, HSBC, Barclays and Vodafone. Smaller-scale protests have spread to Glasgow, Edinburgh, Liverpool, Leicester, York, Bristol, Portsmouth, Southampton, Norwich and Cambridge.

One protester summed up the mood by saying, “The tax gap in the UK is an estimated £120bn, £25bn of this down to tax avoidance by extremely wealthy individuals and big business, while the government is barely lifting a finger to stop it”.

As with any form of direct action, not everyone is impressed: one shopper in London said: “I don’t care what they are protesting about. They purposely picked this weekend to cause as much inconvenience as possible. People are desperately trying to do Christmas shopping. This is my only free weekend and I can’t go to the one place I wanted to.”

The owner of Topshop, Sir Philip Green, is one of the UK’s most successful retailers. With a personal fortune of more than £4bn, he owns the Arcadia Group, whose fashion chains include Topshop, Burton, Dorothy Perkins, Evans and Miss Selfridge. His wife Tina is officially a resident of Monaco. This enabled her to gain a tax-free £1.2bn dividend in 2005.

Sir Philip told the BBC: “We do pay all our tax in Britain. I think we have paid over the last five years some £300-400m in taxes on profits that have been made on our company. I’m a UK taxpayer, I work here every week, we employ 45,000 people in the UK and we have got a £500m payroll.”

In October Vodafone shops were blockaded in a tax protest
by campaigners claiming Vodafone has been let off an unpaid tax bill of £6bn.

Do you think Sir Phillip and other like him have a case to answer? Or is it just public anger being vented at ‘big business’, just as it has been aimed at the banking sector?