The Correct Amount of Tax

07/06/2016By Stefan Ciecierski
A wily old accountant I know always tells me that his role is to help his clients pay the right amount of tax, not to avoid tax.

His words have been ringing in my ears during the last few weeks, whilst I have listened to all the controversy regarding Panama, David Cameron and the issue of what is legally and morally correct. It has led me to question if they can ever be reconciled. I don’t visit Starbucks anymore as I don’t like the coffee, however I can’t help feeling that they are playing the system and therefore don’t deserve my business. At the same time I have been working with a client who wants to know the best place in Europe to put a business. They wanted to look at their potential tax burden in the mix of all the other costs and the availability of people. Some commentators may want to substitute the word ‘burden’ for duty, responsibility or maybe even opportunity.

If we can trust the systems of the country we reside in, then should it not be that using the system to pay the lowest amount of tax possible is the duty of a company’s shareholders? If we pay too much are we not being profligate with other people’s money?

If it is legal and properly calculated, then from a company, tax authority and moral point of view, hasn’t the finance team done a good job? If it ends up being a lower amount of tax than seems reasonable isn’t that the fault of the system of the country where the company is registered?

Can we realistically expect a business to turn around and say that despite all the pressures they are under, they will pay more because they feel it is right?

The systems and laws we abide by either work or they don’t. I have been mulling this over, looking at the inequalities in the EU tax system. If my client sets up in Ireland they will pay 12.5% corporation tax as opposed to 20% in the UK and 29.65% in Germany. They will also only pay 10.75% employer’s tax as opposed to 13.8% in the UK, and 31% if they were in Spain. My client’s company is not a global mega-business but an international concern. They invest everything they earn in their business and they have created hundreds of jobs in Europe. Should they morally go to Germany because the tax is higher there? Why does the EU allow such inequality? Are the owners unreasonable people? Well the owners are not unreasonable people, they just want to protect their company and keep growing it. They want to pay what they owe as a law-abiding organisation.

Ireland suffered very badly in the last recession and did everything asked by the EU to pull itself out of the quagmire. However, are they robbing the potential beneficiaries of tax revenue in other countries? Well, robbing might be a bit harsh but they are certainly undercutting their EU compatriots to help themselves. And the “system” supports this. There are more questions than answers, and things seems to be changing under the weight of debate, but my concern is with the leadership within politics. I want to support a system that I can live in and that works. I believe there is enough cash on the planet for everyone to be wealthy and, while I am no ‘lefty’, I can see inequalities in every society that are clearly wrong. Our debates on these subjects deteriorate into tribal politics that are not helping.

It would be a great help if there was a clear EU strategy on wealth inequality and taxation that pro-Europeans could get behind. However there is very little leadership on anything in Europe, and this vacuum has helped create the issue surrounding Brexit.

Helping companies move to Ireland has been, in my opinion, a good thing, and I am sure David Cameron has put his inheritance to good use and spent the money in the UK. I will also take advantage of my ISA allowance and look for good exchange rates when I travel abroad, and I don’t mind if my pension benefits from some tax haven somewhere.

But, let’s work for leadership and clarity as opposed to the old-fashioned, diametrically different, ‘right’ and ‘left’. Where both sides think they are correct, and the other is not; therefore resulting in the loss of more people and nothing being done.

About the author


Stefan Ciecierski

Chief Executive Officer

Stefan is Chief Executive Officer and Global Head of the psd Technology practice. His expertise covers digital, software, IT & cloud services, telecommunications, consumer electronics & semiconductors, IoT and Fintech. He has over 30 years’ experience in the recruitment industry, and has managed businesses in the UK, Europe and Asia.