At what point should ethical considerations trump actions that are legal?
Appleby, the centenarian law firm, found itself in international news when a data leak exposed its dealings over a period spanning from the 1950s to 2016. Some 13.4 million documents emerged from the company’s offices in Mauritius have been perversely named the Paradise Papers – cementing the exclusivity of the 1%. They expose how some of the world’s wealthiest people and companies stored their wealth in offshore tax havens. This does not mean that there is necessarily wrong doing on the part of those who are implicated, but it raises some important ethical questions about business practice and personal wealth.
The capitalist economic system has been the predominant system through which world economies are run. It has enjoyed dominance without really being interrogated thoroughly because there are, arguably, no better alternatives at this current stage. This does not mean that the capitalist system is a completely terrible system. At its best, capitalism is in agreement with the fundamental nature of human condition – the desire to thrive. Through it the person has an understanding that the more they work, the more they earn, the more they are able to achieve that which they desire for themselves. This particular feature of capitalism is what makes it appealing especially when it is thought about with the history of communism in mind. Communism, especially the model that was active behind the Iron Curtain, failed to create a sustainable economic model where people had incentives to for their performance. The fact that all people received the same food stamps regardless of the amount of work they did meant that many people began to lose motivation because there was absolutely no difference between those who worked and those who do not.
Although there were many ills of communism its fundamental motivation was to bridge the disparity between those who have and those who do not have. It is this very disparity that ought to be the preoccupation of all in society especially those who have plenty. This issue is very much part of the same conversation about the Paradise Papers. The strength of the capitalist system is also its weakness. The desire to have more and to keep more is the main problem which has contributed to the gap between the rich and the poor widening. It is precisely this problem that has led to tax systems through which all people and entities that make money in, through and from a country, can make a contribution in the development and the sustenance of that country and its citizens. If you remove all the trappings of what tax means for different people, one finds that it is fundamentally about paying back a portion of what you make to the one who has made it conducive for you to make a profit.
Linked to this latter point, paying taxes in the particular country where a person works or an entity operates means that one is paying for the preservation of the status quo which has allowed the person or the entity to thrive.
It could be said by many in business that the primary purpose of business is to make a profit and to grow those profit margins. For this reason, finding ways of paying less means that the business ends up saving more. This argument, although true to business principles, is very limited in its view and ethics. It points to an absence of stewardship over the means of production which has allowed the entity or individual to enjoy the wealth they have. The idea of stewardship in business means that the individual and entity have a moral duty to ensure that they create opportunities for others to thrive by contributing through tax and not avoiding it.
The tax system, when it is not abused, creates safety nets for those who find themselves unable to work or do not earn enough to take full care of their lives. This safety net extends to those who receive disability grants, senior citizen grant and other grants. It also extends to the provision of access to healthcare, sanitation and education. The beneficiaries of all these services are also the same people who work for the very companies and persons who try by all means to pay as little tax as possible. Above all, contribution to tax allows the state to also have enough to create prospects of employment for those who need employment. It is not enough for an entity to say that it only has an obligation to those who are in its own employ. It needs to also invest more in the same country where it makes more so that more people can be part of the employed. Employment dignifies people because people in their nature are meant to work. At the centre of this entire conversation is the creation of dignity for all people not the exploitation of resources and people.
The conversation therefore is not necessarily about the legality or illegality of tax havens but rather about the what exactly it means to pay tax in the same place where one operates. To put it in another way: it is unethical to take and profit from a country and desire to pay for that country as little as possible. Tax havens might on the surface seem like intelligent legal ways of saving and growing money, similar to the comments made by the-then presidential candidate Donald Trump who referred to himself as being ‘smart’ for not paying his income tax, but they are by no means ethical. They place a burden on the working class who have no access to private wealth managers who can teach them about how to hide money. It is the working class that are faced to contributing into the state while the rich move and hide their money.
The words of Pope Leo XIII in his seminal encyclical Rerum Novarum (1891) points to a very important measuring stick for social life especially with regards to private ownership and labour – the common good. Ultimately what should bother persons and entities is not finding the most legal way of saving money, but rather it is who else beyond the self does that decision serve.
Pope Leo writes;
‘Whoever has received from the Divine bounty a large share of temporal blessings has received them for the purpose of using them for the perfecting of his own nature, and, at the same time, that he may employ them, as the steward of God’s providence, for the benefit of others… All citizens, without exception, can and ought to contribute to that common good in which individuals share so advantageously to themselves.’ (RN 22, 34). SA.