18 July 2013Life

Full of sound and fury

Can any era have suffered political leaders as incompetent as ours? President Obama was a lame duck more or less from the day he took office. France’s President Hollande seeks to punish those who create wealth. British Prime Minister David Cameron and his hapless deputy Nick Clegg are governing to suit personal agendas. Britain even has a business secretary, Vince Cable, who appears to hate success. Less immediately: Berlusconi. Bush II. Gordon Brown. Sarkozy.

"I am a tax avoider (by nature and profession). So, probably, are you. We pay all the taxes we are legally required to pay, on time and without demur."

The latest crowd of under-achievers has decreed that companies of the stature of Google, Amazon and Vodafone are to be shamed for failing to pay more corporate tax than the law demands. Generally, politicians make the rules and companies play by them. Lately, however, not breaking the law has become punishable by forced appearances before parliamentary committees and Congress.

Cameron has recently taken his case to Europe, where he and his counterparts have promised to crack down on ‘tax havens’. US Congressman Richard E. Neal has reintroduced his failed legislation from the last century to punish non-US re/insurers, in order to protect the few remaining American re/insurers incapable of surmounting their legacy issues. If enacted, Neal’s bill would raise the cost of insurance globally.

If you’re a re/insurer with interests in Bermuda, Cayman or any other indirect taxation jurisdiction, relax. You cannot punish those who obey the tax laws. In many places, it’s hard enough to punish those who break them.

Tax law is written by governments to suit their needs. Those who carefully manage their affairs to satisfy the requirements of such laws are called ‘tax avoiders’. Those who ignore the laws are dubbed ‘evaders’. In simple terms, the former are valuable citizens; the latter, criminals. They have no more in common than saints and sinners. It is absurd to conflate the two practices, as if it were wrong to pay what the law demands and not one penny more.

Governments need only change their tax laws to bring about any outcome they desire. A globalised world needs a globalised taxation regime. Want Google to pay 50 percent corporation tax? Make that rate the law everywhere. Given the raft of legislation passed daily in almost every country in the world, it wouldn’t be so tough … but it would require political will, international coordination and a rigid determination. It would also, of course, cause irreparable damage to enterprise everywhere.

I am a tax avoider (by nature and profession). So, probably, are you. We pay all the taxes we are legally required to pay, on time and without demur. In that regard, we are no different from Google, Starbucks or any company with re/insurance operations in Bermuda or anywhere else. You’d have to be considered feeble-minded if you voluntarily paid more tax than the law demands.

Corporate boards have an obligation to their shareholders to maximise return within legal boundaries. To attempt to shame them for living in Jersey, say, or Singapore, is to reveal powerlessness. The collective noun for those who make the rules and then whine when people do exactly as they are told is, apparently, ‘government’.