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Sainsbury’s CEO: Tax is a moral issue and business must be proactive

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Justin King, Sainsbury’s CEO, has said that tax is a moral issue and that companies should be prepared to explain and defend their tax arrangements.

Speaking at the British Retail Consortium’s annual symposium of business leaders last week, King said: “Tax is a moral issue, I would argue. Every business in a position of trust should be able to stand up and try to explain why they arrange their affairs the way they do if they believe they have nothing to hide”.

“Trust is a moral issue and you can’t claim to hold a trustworthy space on any issue, including tax, by just saying “I’m operating within the law” because it is not a good enough articulation to win trust,” added King.

Some companies are already actively seeking to explain their tax arrangements, going above and beyond existing disclosure requirements.

“At UBS, for example, we have published a code of practice for tax and we have shared that within the organisation, as well as with the tax authorities,” Todd Tuckner, Chief Operating Officer for the global finance function at UBS, told EY’s T Magazine. “Communication is vital. The more tax leaders can communicate the tax strategy and the complexity of the issues that it is dealing with to senior management, the better.”

Legal & General has also produced an expanded annual report which included a country-by-country breakdown of taxes borne and collected.

“Rather than complain to each other that the public are angry because they just do not understand what we do, we have a collective responsibility to engage and raise the level of debate,” said Simon Burke, group tax director at Legal & General, in an exclusive article for International Tax Review, co-written with Laurence Youngman, the company’s international tax manager.

However, not all taxpayers subscribe to this pro-active approach. Tim Cook, Apple CEO, defended his company’s tax planning strategies in front of the Senate Permanent Subcommittee on Investigations.

“We pay all the taxes we owe, every single dollar,” said Cook. “We not only comply with the laws, but we comply with the spirit of the laws. We do not depend on tax gimmicks.”

And others have since declared their support for Cook’s stance. Some have said he did not go far enough in defending a company’s ability to engage in aggressive tax planning.

“It’s not Apple’s fault that they are seeking to avoid paying taxes,” said John Mackey, co-founder and chief executive of Whole Foods Market. “They are not lying, cheating or stealing. They are following the rules that were created by governments. If the government doesn’t like the rules, they can change them.”

Sir Roger Carr, head of the Confederation of British Industry, is among those to have called for less moralising from political figures, saying tax evasion and aggressive avoidance is a legal matter, rather than being about “black and white moral judgments in the eyes of God”.

“Tax payments are not, and should not be, a payment viewed as a down payment on social acceptability, or a contribution made by choice in order to defuse public anger or political attack,” said Carr.

But along with the examples of Legal & General’s tax disclosures, and Starbucks’ voluntary corporate tax payments, a recent survey conducted by Standard Chartered certainly corroborates the stance that companies are placing greater importance on the contribution they make to society, and that this extends beyond tax.

The survey indicated that the much-maligned UK banking industry commits the largest amount of volunteering time to charities, and that companies from the sector are also the most supportive of their employees donating time to charities during the working day.

“The results of the survey make compelling reading and reaffirm our wider effort to support the communities in which we operate. By offering all our employees three days’ paid leave each year for volunteering, we were able to donate a total of over 86,300 days last year,” said Richard Holmes, Standard Chartered Bank’s CEO, Europe.

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