Thus, the ethics of tax avoidance strategies depend on the ethical basis of the person evaluating such actions. A person adopting Aristotle`s virtue perspective could evaluate tax avoidance strategies in the context of an individual`s other virtuous behaviours. If someone avoids taxes but financially supports other institutions or organizations that are important for tax avoidance but also bring benefits to society, then the virtuous individual may view this behavior with less contempt. For example, someone may employ tax avoidance strategies and direct some of the wealth to provide funds directly to an academic health centre for cancer research. But if that person uses tax avoidance strategies in the absence of other virtuous behaviours, then tax avoidance is likely to be considered unethical. Tax avoidance is the use of legal methods to reduce taxable income or taxes owing. Claiming tax deductions and allowable tax credits is a common tactic, as is investing in tax-advantaged accounts such as IRAs and 401(k). Tax avoidance is the use of legal methods to minimize the amount of income tax owed by an individual or business. This is usually achieved by claiming as many deductions and credits as possible. This can also be achieved by prioritizing investments with tax benefits such as purchasing municipal bonds. Although they seem similar, „tax avoidance“ and „tax evasion“ are radically different. Tax avoidance reduces your tax bill by structuring your transactions to give you the best tax benefits.
Tax evasion is perfectly legal – and extremely clever. Tax avoidance uses legal methods found in tax legislation to reduce your overall tax liability. In essence, it`s about consciously structuring your assets in a way that pays as little tax as possible. Instead of hiding behind the business case for tax evasion, businesses need to make their tax planning transparent. Businesses and government need to be more careful about communicating their position on this issue and their interpretation of the law – and most importantly dealing with it openly. This would restore public confidence and bring greater certainty to the economy. In the UK, the introduction of a General Anti-Abuse Rule (GAAR) is proposed to prevent tax regimes that the government considers „abusive“ and that David Cameron has described as „morally wrong“. However, some argue that the new law should be a more comprehensive anti-tax avoidance rule, although this raises challenges as to what constitutes „appropriate“ behaviour, is subjective and difficult to define, and creates too much uncertainty for businesses. Since 2014, the International Consortium of Investigative Journalists (ICIJ) has leaked various documents – including the Panama Papers and the Paradise Papers – revealing how tax evasion and evasion have become common business practices around the world. At a time when cuts in public spending are having a real impact on people`s daily lives, how can multinationals avoid paying their fair share of taxes? As Vince Cable put it, „Systematic tax avoidance by high net worth individuals and UK-based companies has a particularly ugly tone in these difficult times.“ Corporate tax avoidance will be a topic of discussion at the G8 Summit in June 2013.
Prime Minister David Cameron promised to use the British presidency at the event to crack down on multinationals that avoid paying British taxes. Public anger over tax evasion increased in 2012, according to a Christian Aid survey of the British public.4 It found that four out of five people agreed that tax evasion by multinationals made them „angry“. The survey also found that a third of Britons say they boycott companies that don`t pay their „fair share“ of taxes in the UK. In a 2012 BIE survey by Ipsos MORI, „tax evasion“ was the second most important ethical issue that the British public considers necessary for the economy.5 Despite contributing to the economy in other ways, multinational companies operating in developing countries (where much of the population lives in poverty) have met with much public disapproval. because they pay little or no corporate income tax (e.g. Associated British Foods in Zambia).6 Paying a fair amount of tax in the countries where they operate is considered socially responsible by companies: providing funds for public services such as healthcare, education and infrastructure.