1. IT’S LEGAL, BUT IS IT MORAL?: TAX MORALITY AND ITS LIMITS
I’m Alison Holder
I work for Oxfam in the UK and I lead our policy work on tax and inequality
Oxfam is a global movement of milions of people who share the belief that, in a world rich in resources, poverty isn't inevitable
I work in the UK, but I have Oxfam colleagues here representing Oxfam Quebec and Oxfam Canada, and you may well be familiar with their great work
You may have questions about why an organisation like Oxfam is working on tax issues, but I hope by the end of my presentation that will be more clear
Alison Holder, Inequality and Tax Policy Manager, Oxfam
November 2015

2. TAX AND MORALITY

3. IS TAX A MORAL ISSUE – YES AND NO!
There are moral considerations when it comes to taxation
But the need to rely on moral judgement in matters of taxation is ultimately a reflection of our broken tax system
Appealing to large corporations to be moral in matters of taxation wreaks of desperation
However, the framing of tax as a moral issue is a sign that norms are changing
Trying to avoid paying your fair of tax is immoral - but taxation it is too important to be left to morals alone
There are moral considerations when it comes to taxation
Judgements about the “letter “and the “spirit” of the law may require some personal judgement
But the need to rely on moral judgement in matters of taxation is a reflection of our broken tax system
Legal obligations should eliminate the need for guesswork
Appealing to large corporations to be moral in matters of taxation wreaks of desperation
Perhaps we feel powerless to change the rules that guide corporate taxation, so think that an appeal to morality will bring in some scraps (Ref: Starbuck’s voluntary tax payment in the UK)
The framing of tax as a moral issue is a sign that norms are changing
Other areas that are considered to have moral or ethical dimensions in business – such as the use of child labour or paying a fair wage
At one time using child labour would have been considered a business necessity, then became immoral, then a mix of unacceptably risky and illegal over time
Trying to avoid paying your fair of tax is immoral - but taxation it is too important to be left to morals alone

4. TAX AS AN ISSUE OF FAIRNESS AND JUSTICE
The general public finds tax avoidance to be unfair
85% of British adults say tax avoidance is ‘morally wrong, even if it is legal’
Complaints from experts that tax issues are oversimplified in public debate
But also deliberate attempts to stifle debate with a focus on technicalities
Tax is complex in many ways, but it is also quite simple!
Basic injustice that the richest individuals and companies have access to advisers and tax planners and the use of offshore tax havens to help them minimise their tax bill
Corporations benefit from public goods (like roads, ports, and healthy and educated workers and consumers) so why should they get away with not paying their fair share?
Simple statement of fact: The general public finds tax avoidance to be unfair – they understand it is legal but don’t think it should be!
A recent public opinion poll showed massive public support for tackling tax avoidance by large companies, with 85 percent of British adults saying it is ‘morally wrong, even if it is legal’.
78 per cent of respondents also said it was important to them that ‘large UK companies pay their fair share of tax in developing countries in which they operate, so it’s not just the UK’s own tax revenues that they’re worried about
I often hear from tax experts in business and academia that tax issues are oversimplified in public debate – and this is surely true sometimes (Oxfam is probably a guilty party at times!).
But also deliberate attempts to stifle debate with a focus on technicalities – as if people don’t understand every nuance of the tax code, they shouldn’t get to have a point of view on tax matters
Tax is complex in many ways, but it is also quite simple!
People find it a basic injustice that the richest individuals and companies have access to elite networks of advisers and tax planners and the use of offshore tax havens to help them minimise their tax bill
Corporations benefit from public goods (like roads, ports, and healthy and educated workers and consumers) so why should they get away with not paying their fair share?

5. TAX AS A MEASURE OF SOCIETAL EFFECTIVENESS
A good tax system generates sufficient revenue to sustain the institutions and activities of the state
A broad tax base is needed – with contributions from individual citizens and companies – to maintain healthy public finances
Link between good tax systems and good governance – states that are over-reliant on other sources of income tend to have less accountable and responsive governance
“Though tax records are generally looked upon as a nuisance, the day may come when historians will realize that tax records tell the real story behind civilized life. How people were taxed, who was taxed, and what was taxed tell more about a society than anything else. Tax habits could be to civilization what sex habits are to personality. They are basic clues to the way a society behaves.”
Charles Adams, Tax Attorney and Professor, Author of The Rise and Fall of Civilization According to Tax Collection
A good tax system generates sufficient revenue to sustain the institutions and activities of the state
A broad tax base is needed – with contributions from individual citizens and companies – to maintain healthy public finances
Research has shown that there is a link between good tax systems and good governance – states that are over-reliant on other sources of income (such as international aid and income from natural resources like oil and minerals) tend to have less accountable and responsive governance
“Though tax records are generally looked upon as a nuisance, the day may come when historians will realize that tax records tell the real story behind civilized life. How people were taxed, who was taxed, and what was taxed tell more about a society than anything else. Tax habits could be to civilization what sex habits are to personality. They are basic clues to the way a society behaves.”
Charles Adams, Tax Attorney and Professor, Author of The Rise and Fall of Civilization According to Tax Collection

6. TAX AS A HUMAN RIGHTS ISSUE
Tax is at the core of the social contract between citizens and state and between businesses and the state
Abuse of the tax system and/or use of power to shape tax policies → Undermining of social contract and robbing governments of the revenues they need to fulfil human rights obligations
Tax justice is increasingly being framed as a human rights issue
Malawi, the poorest country in the world, → lost out on US$43 million in revenue over the last six years from the Australian mining company Paladin.
New research (out next week) → Taxes lost because of profit shifting by US companies in just one year could have paid for the salaries of millions of nurses worldwide. Not one million, not two million but several million nurses
Tax is at the core of the social contract between citizens and state and between businesses and the state
When powerful and wealthy individuals and businesses abuse the tax system or use their power to shape tax policies in their favour, they undermine the social contract and rob governments of the revenues they need to fulfil human rights obligations
Tax justice is increasingly being framed as a human rights issue – tax dodging causes human rights violations which directly cause deaths because states don’t have sufficient revenue to deliver healthcare to their poorest citizens
Malawi, the poorest country in the world, has lost out on US$43 million in revenue over the last six years, from a single company – the Australian mining company Paladin. The money has been lost through a combination of harmful tax incentives from the Malawian government, and tax planning using treaty shopping by Paladin.
Next week, Oxfam (along with its civil society allies like Tax Justice Network, the Global Alliance for Tax Justice and Public Services International) will release new research using data on US multinational companies showing that a conservative estimate of the taxes lost because of profit shifting by US companies in just one year could have paid for the salaries of millions of nurses worldwide. Not one million, not two million but several million nurses

7. EXTREME INEQUALITY
I want to take a few minutes to talk about another issue that is closely related to that of tax – the issue of extreme inequality

8. EXTREME INEQUALITY IS THE ISSUE OF OUR TIME
Oxfam has become well known for its shocking statistic that just 80 people have more wealth than the bottom half of society – as many people as can fit on a double decker bus

9. THE GROWING GAP BETWEEN RICH AND POOR
Since we launched our Even It Up campaign last year, inequality has risen so much that it has exceeded even Oxfam’s own grim predictions. We said that by 2016, the richest 1% will be richer than the rest of the world combined. But by October 2015, this had already happened
We can now say that we live in a world where the 1% is richer than the rest of the world combined

10. INEQUALITY THREATENS SOCIETY AND IS BAD FOR US ALL
Economic inequality is associated with a range of health and social problems, like mental illness and violent crime.
Homicide rates are almost four times higher in countries with extreme economic inequality than in more equal nations.
Latin America – the most unequal and insecure region in the world –has 41 of the world’s 50 most dangerous cities, and saw a million murders take place between 2000 and 2010
Why now
There is increasing recognition that inequality is not just ‘bad’ (unfair) in itself but also makes fighting poverty much more difficult, impacts growth, social cohesion and the environment. Crucially it is bad for everyone rich and poor: Countries that are more unequal have higher rates of crime (particularly violent crime), mental illness, imprisonment and addiction.
A growing body of evidence has demonstrated that economic inequality is associated with a range of health and social problems, including mental illness and violent crime. This is true across rich and poor countries alike, and has negative consequences for the richest as well as the poorest people.
Additional information: 
Homicide rates are almost four times higher in countries with extreme economic inequality than in more equal nations. Latin America – the most unequal and insecure region in the world – starkly illustrates this trend. It has 41 of the world’s 50 most dangerous cities, and saw a million murders take place between 2000 and Unequal countries are dangerous places to live in.

11. WHY NOW?
“The combined trends of increased inequality and decreasing mobility pose a fundamental threat to the American Dream, our way of life, and what we stand for around the globe” (2013)
“In far too many countries the benefits of growth are being enjoyed by far too few people. This is not a recipe for stability and sustainability” (2014)
President Obama
Increasing consensus among global leaders, across the political spectrum, of the need to tackle growing income inequality
The world is finally waking up to the inequality crisis. Its not just anti-poverty organisations that are talking about it. There is rare and notable consensus among global leaders, across the political spectrum, of the need to tackle growing income inequality. This includes strong public statements on the need to tackle growing inequality from Christine Lagarde (the head of the IMF), the Pope, President Obama, Michelle Bachelet (President of Chile), and Warren Buffet (the 3rd richest man in the world) among many others. Inequalities have also been central to popular protests, such as those in Turkey, Chile and Brazil.
Christine Lagarde, IMF
“There’s been class warfare going on for the last 20 years and my class has won” (2011)
Warren Buffet

12. THE LINKS BETWEEN INEQUALITY AND TAX
Broad agreement that extreme inequality is
Immoral
Unfair and unjust
Ineffective – that is, not good for anyone whether rich or poor
A breach of human rights
Strong links between inequality and tax
When the tax system is unfair, inequality rises.
Tax revenues are needed to tackle the problem of inequality – for e.g., investing in public services that disproportionately benefit the poor
And the tax system is a key tool for redistributing wealth
Fixing our broken tax system is necessary for
Morality
Justice
Effectiveness
The realisation of human rights
Very many people – and in this case, not just the general public but (as you can see from the previous slide) people in business, government and powerful institutions – seem to agree with Oxfam that extreme inequality is
Immoral
Unfair and unjust
Ineffective – that is, not good for anyone whether rich or poor
A breach of human rights
All things I also claimed about our current tax system at the beginning of my presentation
There are inarguably strong links between inequality and tax
When the tax system is unfair, inequality rises.
Inequality rises when tax rules are unfair. When corporations pay less tax, profits increase, and these profits accrue overwhelmingly to the top 10% and 1% richest people especially. In the US, for example, about 50% of corporate income is held by the richest 1% of society
Tax revenues are needed to tackle the problem of inequality – for e.g., investing in public services that disproportionately benefit the poor
And the tax system is a key tool for redistributing wealth
If you can agree with all of that, then you must also agree that fixing our broken tax system is necessary for
Morality
Justice
Effectiveness
The realisation of human rights

13. TAX AS A CORPORATE RESPONSIBILITY ISSUE
Let me be clear – the majority of Oxfam’s work is focused on developing countries, where millions of women and men live in extreme poverty.
On the ground, we also see how vital it is for developing country governments to collect revenues from taxation, and in particular those from corporate taxation, in order to fund essential public services, such as healthcare and education, and to pay for the public infrastructure needed to raise living standards, increase equality and build well-functioning economies.
This is why we will always put the majority of our effort into advocating for government-led reforms and binding rules
Tax is too important to be left entirely to questions of morality or to voluntary actions by companies
But tax is a corporate responsibility issue
There are meaningful and immediate steps that companies can take to improve the impact of their tax behaviour on the societies, and particularly the developing countries, where they do business

14. TAX AS A CORPORATE RESPONSIBILITY ISSUE
The idea of tax as a corporate responsibility issue is not new
There is a growing movement to have tax seen as a core part of a company’s corporate social responsibility (CSR) agenda – and not just part of, but the most important part
Fair Tax Mark
A growing number of companies (particularly in the UK, but the Fair Tax Mark is expanding) are seeing the value in meeting the rigorous criteria to achieve Fair Tax Mark status.
The UN Global Compact
There is a growing recognition that the UN Global Compact should add an 11th Principle to its “Guiding Principles for Responsible Business” around the payment of fair taxes
The idea of tax as a corporate responsibility issue is not new
There is a growing movement to have tax seen as a core part of a company’s corporate social responsibility (CSR) agenda – and not just part of, but the most important part
Fair Tax Mark
Richard Murphy, the Founder of the Fair Tax Mark, is here
A growing number of companies (particularly in the UK, but the Fair Tax Mark is expanding) are seeing the value in meeting the rigorous criteria to achieve Fair Tax Mark status.
They see it as a way of distinguishing their business – it’s precisely this kind of “race to the top” that we need to be seeing amongst responsible companies with regards to their tax practices
The UN Global Compact
There is increasing recognition that the UN Global Compact should add an 11th Principle to its “Guiding Principles for Responsible Business” around the payment of fair taxes

15. NEW REPORT ON RESPONSIBLE TAX BEHAVIOUR (OUT SOON!)
New report → “Getting to Good – Towards Responsible Corporate Tax Behaviour”
“Responsibility beyond legal compliance”
8 areas of the corporate tax agenda:
1. Tax planning practices
2. Public transparency and reporting
3. Non-public disclosure
4. Relationships with tax authorities
5. Tax function management and governance
6. Impact evaluation of tax policy and practice
7. Tax lobbying/advocacy
8. Tax incentives
This is why Oxfam, along with its civil society partners Action Aid and Christian Aid, are about to publish a new report called “Getting to Good – Towards Responsible Corporate Tax Behaviour”
A discussion paper examining why and how approaching tax responsibility beyond legal compliance benefits companies and the developing countries in which they operate
As necessary as it is to reform international tax rules -– achieving more equitable tax outcomes also requires a change in the attitude and approach to tax taken by companies.
As is the case with many issues of corporate responsibility, it is not just regulation, but values, that must shape tax behaviour. We call this “responsibility beyond legal compliance”
I can’t give away the content of the report until it is launched, but I can say that it introduces the concept of responsible tax behaviour and explains why it matters (and why it matters for developing countries)
It then explores 8 areas of the corporate tax agenda, providing propositions for what responsible tax behaviour looks like and concrete examples
1. Tax planning practices
2. Public transparency and reporting
3. Non-public disclosure
4. Relationships with tax authorities
5. Tax function management and governance
6. Impact evaluation of tax policy and practice
7. Tax lobbying/advocacy
8. Tax incentives
The report has been a long time in the works and has had significant input from tax experts in the private sector as well, so I hope it will be a useful contribution to the debate
Do look out for it when it is released towards the end of this month

16. “SECOND GENERATION” TAX REFORM

17. PROBLEMS WITH THE CURRENT TAX SYSTEM
The current international tax system is broken
Many companies not paying a fair share of tax in the countries where their real business activity is taking place – that is the countries where they have assets, employees and sales
Tax evasion and tax avoidance is fuelling inequality – because it contributes to a trickle up of income and wealth
The G20 and OECD recognises this, and the Base Erosion and Profit Shifting (BEPS) process was designed to begin to fill the gaps in the current system
Diagnosis of the problems = Agreement
The current international tax system is broken
Designed 100 years ago
Not fit for purpose
Works in the interest of richer countries, and disadvantages poorer countries
I don’t have to explain to this audience that globalisation has changed the way that companies operate – for multinational companies (MNCs) national borders no longer exist, yet tax systems remain within national borders
The result is that many MNCs are not paying a fair share of taxes in the countries where their real business activity is taking place – that is the countries where they have assets, employees and sales
Tax evasion and tax avoidance is fuelling inequality – because it contributes to a trickle up of income and wealth
The G20 and OECD recognises this, and the Base Erosion and Profit Shifting (BEPS) process was designed to begin to fill the gaps in the current system
Pascal Sant Amans is here I know, and I’ve heard him describe himself as a “fire-fighter” trying to put out the fires created by the current broken tax system
So on the diagnosis of the problems, I think we largely agree

18. ICRICT: THE INDEPENDENT COMMISSION FOR THE REFORM OF INTERNATIONAL CORPORATE TAXATION
Tax multinationals as single firms
Curb tax competition
Strengthen enforcement
Increase transparency
Reform tax treaties
Build inclusivity into international tax cooperation
But when it comes to a shared understanding of what is needed to fix these problems, there remain major gaps between civil society organisations working on tax justice and many of the world’s most powerful governments, companies and international institutions like the OECD
One fresh new voice in the debate about global tax reform this year is the ICRICT Commission. ICRICT stands for the Independent Commission for the Reform of International Corporate Taxation. In terms of a diagnosis of the problems in our current tax system and broad sweeping proposals for how to address these problems, I wholeheartedly the ICRICT report, which came out in June this year
The ICRICT Commission includes several prominent thinkers from across the globe, to put forward an alternative vision for what a fairer tax system would look like. It is chaired by Jose Antonio Ocampo, former Finance Minister of Colombia and includes Joseph Stiglitz, the Nobel-prize winning economist.
In June this year ICRICT published their Declaration and proposed action in X areas:
Tax multinationals as single firms
Curb tax competition
Strengthen enforcement
Increase transparency
Reform tax treaties
Build inclusivity into international tax cooperation
I have some printed copies of the Declaration with me today, or you can find it at
“ICRICT unanimously agreed that the current system is broken, and that minor tweaks will not fix it. “
Joseph Stiglitz

19. BEYOND BEPS: WHERE DO WE GO FROM HERE?
Base Erosion and Profit Shifting (BEPS) → a welcome step but with several key weaknesses
Oxfam’s proposal is a second generation of tax reforms – driven by a more inclusive governance structure, where all countries have an equal say and influence on the design and implementation of reforms
The second generation of tax reforms must include:
Ending harmful tax competition and the race to the bottom
Reallocating taxing rights between countries so source and residence countries benefit fairly from corporate tax revenues
Addressing the avoidance of capital gains tax
Taxing companies as single entities for tax purposes
Ultimately → Democratic and inclusive global tax body
The BEPS process was a welcome step and we in civil society are sometimes too quick to gloss over the immense challenges faced in forging enough consensus to make the progress that they have
It is a sobering reminder of how difficult it will be to improve tax cooperation in a world that has become all too comfortable with a race to the bottom and competition between nation states
Oxfam has been critical of the BEPS process for two main reasons: one because two thirds of the world’s countries played no formal role in developing the plans and two because the agenda was too narrow
It’s now just days before the Leaders of the G20 countries, the world’s most powerful, endorse the BEPS Action Plans.
It’s the right time to think, what next?
Oxfam’s proposal is a second generation of tax reforms – driven by a more inclusive governance structure, where all countries have an equal say and influence on the design and implementation of reforms
The second generation of tax reforms must include:
Ending harmful tax competition and the race to the bottom
Reallocating taxing rights between countries so source and residence countries benefit fairly from corporate tax revenues
Addressing the avoidance of capital gains tax
Taxing companies as single entities for tax purposes
Ultimately, we see the need for a global tax body, an institution where all countries have an equal seat at the table to agree on global tax rules

20. CONCLUSION

21. CONCLUSION Tax is a moral issue – but it is more
Our current tax system is not just immoral but
Unjust
Ineffective
A violation of human rights
Tax is also a corporate responsibility issue
There are meaningful and immediate steps that companies can take to improve the impact of its tax behaviour on the societies, and particularly the developing countries, where they do business
Fixing the problems in our tax system require greatly improved international cooperation on tax, much more ambitious government-led reforms, and binding rules
Fully inclusive and democratic global tax body
Tax is a moral issue – but it is more
Our current tax system is not just immoral but
Unjust
Ineffective
A violation of human rights
Tax is also a corporate responsibility issue
There are meaningful and immediate steps that companies can take to improve the impact of its tax behaviour on the societies, and particularly the developing countries, where they do business
Fixing the problems in our tax system require greatly improved international cooperation on tax, much more ambitious government-led reforms, and binding rules
Oxfam’s proposal is a second generation of tax reforms – driven by a more inclusive governance structure, where all countries have an equal say and influence on the design and implementation of reforms
The second generation of tax reforms must get at the root of the problems in the current tax system, and pursue a broad agenda such as that proposed by the ICRICT Commission
Ultimately, we see the need for a global tax body, an institution where all countries have an equal seat at the table to agree on global tax rules

22. ALISON HOLDER OXFAM aholder1@oxfam.org.uk @alieholder