Politicians should match their strident rhetoric on tax avoidance with legal change, says Ernst & Young's Mark Otty
POLITICIANS should “stop banging on about morality and change the law” on tax avoidance, according to Ernst & Young’s managing partner for Europe, Middle East and Africa Mark Otty.
Responding to calls for businesses to “pay their fair share”, Otty said a moral code is unlikely to work, given that they have a duty to pay the lowest rate permitted.
Speaking last week at the World Economic Forum in Davos, Switzerland, the prime minister (pictured) said companies paying little or no tax, such as Starbucks, have to “wake up and smell the coffee”.
“I am a low-tax Conservative, but I’m not a companies-should-pay-no-tax Conservative,” he said. “Individuals and businesses must pay their fair share.”
Following Cameron’s remarks, Otty told the Telegraph the “only way” to resolve the issue is “through legal code”.
“I don’t see how you can have any assessment on payments of tax other than what is in the statute,” he said. “The simplest solution is to stop banging on about morality and change the law.”
Public outrage has mounted throughout the past year over tax contributions made by multinationals, which often move profits from one country to another, frequently resulting in lower tax rates. Amazon, Google and Starbucks in particular have been the subject of public ire over the use of the method, known as transfer pricing.
Recently, Starbucks has threatened to suspend multimillion-pound investments in the UK after repeatedly being the subject of attacks from both politicians and the media over its low tax bills. Investment bank Goldman Sachs, too, has drawn criticism for its tax practices, something chief executive Lloyd Blankfein said risks stigmatising “every right-thinking person who organises his or her affairs in a sensible way”.
For its part, E&Y would not be altering its tax practicesm, according to Otty.
He said: “It comes back to the law. A company has responsibility to its shareholders, its staff and society.
“In days gone by, it was a much easier argument. Now there is this morality test. For an organisation, it becomes very difficult … you don’t know what the rules are or who the arbiter is.”
Starbucks agreed with Cameron that all companies should pay their fair share of tax.