Setting the scene
Tax will always create a lively debate and differences of opinion. What is the philosophical basis of tax? Who should pay and how much? Is it just about state finance or does it involve redistribution, correcting market failures and changing behavior? Is there such thing as a ‘fair’ amount of tax? Is tax just legal or does it have an ethical dimension?
The issues become more complex in a global economy. Different cultures have varying attitudes to tax. How should taxing rights be split between countries? How do decisions in one country affect the ability of another to raise tax?
These questions, and more, are what the Responsible Tax Project aims to address. So what is Responsible Tax? It’s not being evasive to say we don’t really know yet, and in any case it would be wrong to try to impose a definition as if KPMG had a monopoly of truth on the issue. So the first thing to say about Responsible Tax is that it requires considering all the issues and factors in play. Therefore, it is an approach and outcome that is negotiated and determined by all the tax stakeholders – governments, corporates, civil society, academics etc.
It follows that there cannot be a static definition. It is and will be a moveable feast as new facts, practices, beliefs and conditions emerge.
But equally the project can’t just be a blank space, the process might be everything, but we know irresponsibility when we see it. So what might responsible look like?
We think the starting point is a recognition that tax is the entry price we pay to a civilized society. Tax, even responsible tax, cannot solve all our social, economic and environmental problems, but it plays a big part.
Secondly there must be respect for the rule law. Linked to this there is a need for tax laws, as far as possible, to be clear, certain and simple to apply. They should respect the principle of proportionality and taxes should be efficient to collect.
Thirdly, there is a moral dimension to tax: the amount of tax which is paid is often determined by actions which are taken and choices which are made and these have moral implications.
Finally Responsible Tax requires transparency and accountability.
So what is Responsible Tax?
So Responsible Tax is an approach that applies to everyone involved in the debate. Governments need to create good tax policy and clear law, taking into consideration the needs of their own societies and the global impact of their decisions. Taxpayers need to be able to understand their rights and duties and balance their legitimate desire to manage their affairs efficiently with respecting the law and the communities in which they operate. Advisors need to represent their clients’ tax, business and reputational interests, and assist them in making judgments. Civil society needs to represent the interests of a broad range of communities, while recognizing the tensions taxpayers face. The media needs to be objective and balanced in its coverage.
What we tax, how and when we arrive at Responsible Tax system – especially on a global basis – demands a journey of discovery for all of us. A journey in which we have to be as honest and open as we can. Changing ourselves (maybe the only thing we can change?) is the precursor to changing the system and therefore the outcomes we as a society want to see.
So the answer to the question – what is Responsible Tax – is that it’s complicated. But that means we just have to try harder with as many people as possible in the belief that complexity can only be met by complexity.
Having tried to avoid an answer – here is a starter for 10 to kick off the debate:
Responsible Tax is an approach to tax that is open, developmental and considers the interests of all stakeholders - governments, taxpayers, and communities. It knows that tax is the entry point to a civilized society. It recognizes that tax should be charged according to law and follow the generally accepted criteria of being, as far as possible, progressive, clearly drafted, simple to apply and efficient to collect. At the same time it acknowledges there is a moral dimension in the way laws are interpreted, applied and used. It employs effective transparency so that all stakeholders’ can ultimately decide what Responsible Tax is.
Chris became Head of Tax Policy for KPMG UK in 2011. In this role he was a regular commentator in the press, as well as on radio and TV, led discussions on various representations with HMRC/HMT. In 2014 Chris spearheaded KPMG UK’s Responsible Tax for the Common Good initiative. In September 2016 Chris took on the role of Head of...