New user? Register here:
Email Address:
Retype Password:
First Name:
Last Name:
Existing user? Login here:

Death or taxes

Kathy Galloway

Rich corporations call it creative accounting, but tax dodging can be a death sentence for the world's poor. Kathy Galloway examines the tangled ethics of 'rendering unto caesar'…


In the late 1980s, along with many thousands of Britons, I was involved in protesting against the poll-tax introduced by the Conservative government of Margaret Thatcher. Tax-collectors are routinely referred to in the gospels as among the greatest of sinners. But those who work for the Inland Revenue today are safe from this kind of designation. The gospel resistance to tax was not to the principle. Rather, it was based on two realities.

First, like the poll tax in the UK, the taxation system weighed particularly heavily and unjustly on the people who could least afford it. Jesus' concern for the poor is central to the gospels; in Matthew 21, we read that he had just overturned the tables of the moneylenders in the temple, where the very poorest were subjected to a kind of loan-sharking in order to be able to make their temple offerings. To fulfil the requirements of the law, it was necessary to make sacrifices - small animals or birds (doves were a favourite) or amounts of money. A brisk business trading in these went on, right inside the temple courtyard. But the poor, the majority, had either to borrow the money to buy the offerings, or couldn't afford them at all. If you borrowed, you weren't in a position to bargain, you just had to take the rate you got and stand a good chance of being fleeced. So your only choice was either to get into debt to fulfil your obligations, or default on them, find yourself classified among the sinners, and be excluded from the number of the righteous.  You didn't have to do anything we might consider morally wrong to be a sinner, you just had to be poor.   

This was a brutal kind of transaction. It effectively commodified people's whole belonging and identity within the Jewish community. It made a mockery of the justice and faithfulness of God. It put huge numbers of people outside holiness. Jesus' action in overturning the moneylenders was a great shout of protest on behalf of the poor, an alternative vision of holiness. This was profoundly threatening to the authorities in Jerusalem, whose temporal power, exercised on license, so to speak, from the Roman Empire, depended on their being able to demonstrate that they had not just the spiritual power that stemmed from their religious roles but the moral authority to ensure that the populace did not upset this balance of powers.

The second reality concerning taxation was that the taxes were being collected on behalf of an occupying power, the Roman Empire. Tax collectors were not hated because they collected taxes, but because they were considered to be traitors by doing so for a foreign power. (Similar scenarios led to the American War of Independence and to the end of British domination in India when Gandhi led non-violent resistance to an unfair salt tax.) In Matthew 22, a question about taxes famously posed to Jesus was a loaded one. It was not just about money, it was about power. Jesus was being confronted here by a rather unlikely alliance. The Pharisees were nationalistic Jews,  middle-class anti-Romans. Those of Herod's party were collaborators with Rome, urbane upper-class people who knew and played the system well, and were adept at managing the compromises involved in sharing power with Rome. The two groups were traditional enemies. But even more than they despised  each other, they feared the challenge presented by Jesus, the rural upstart who proclaimed the rule of God, which they purported to represent, and championed the poor. So they put aside their differences in another attempt to trap Jesus and make him stumble before their political power.

They began by trying to flatter Jesus into giving himself away. The question was: 'Is it against our law to pay taxes to the Roman Emperor, or not?'  If Jesus said, 'pay', then he would reveal himself as a collaborator, a traitor, and discredit himself in the eyes of most Jews. If he said, 'don't pay', then he was open to charges of lawlessness and criminality.  Jesus knew they were trying to trap him. So he answered their question with another question. He asked for a coin. The implication was that he did not have one himself, and if he had no money, then he wouldn't be paying any taxes. This was not the time of bank accounts and cash-machines. But he never actually said so.

When the coin was produced, he asked them to describe it. The face was the Roman Emperor, the inscription underneath 'Son of the Divine', blasphemy to any devout Jew. The claims of Caesar, depicted on his money, were not only economically and politically oppressive, they were idolatrous, claiming an authority which belonged only to God. But Jesus would not be constrained within the limits of the question he was being asked. By calling for the coin, Jesus had sprung the trap set for him, turning the question back to them. Now the questioners were the ones who had to declare.

In his final statement, 'render to Caesar the things which are Caesar's and to God the things which are God's', Jesus drew another distinction between himself and the Pharisees. They talked of paying taxes. Jesus spoke of 'giving back' (and the Greek makes it clear these are different things). What Jesus referred to was a submission to authority. This text has sometimes been used to justify a rigid separation of faith and politics, to assert that God and money have nothing to do with each other, that the things of God belong in a realm called 'spiritual' while money belongs to a material realm from which faith must keep its difference and its distance. But Jesus demonstrated that people's values and motivations, their spirituality, showed up precisely in how they used their money. And no Jew in Jesus' audience would divide reality between the power of God and the power of Caesar. On the contrary, many believed that Caesar had usurped God's authority and must be driven out by armed revolt.
Jesus' words presented a huge challenge to his listeners, and they still do to us today. Were the Pharisees, in their opposition to paying taxes, driven not just by nationalistic fervour but by their own love of money and indifference to the plight of the poor, whom they  subjected to religious exclusion? Were the Herodians really motivated by concern for good order and the safety of their fellow Jews, or rather by the power and influence their collaboration gave them? Were the onlookers looking for easy answers from the party that would tell them what to do and save them having to make hard moral choices themselves?


Jesus' words and actions depict a very subtle position. He accepted neither the authority of the Sanhedrin, the religious powers, nor that of Rome, the military power. But neither did he sanction open, and certainly not armed, revolution. He changed the terms of reference, and questioned the very nature and legitimacy of authority. Money, good order, political influence, all have a claim and a role. But all are subject to the authority of God, to God's justice and mercy, and that meant a radical reordering in favour of the poor and dispossessed. If money was your god, you needed to be liberated from that attachment, if power, then that too was a chain. And in the face of all these competing claims, no one was going to allow you to shake off your responsibility and hide behind others. You had to decide for yourself as to the weighting you gave each of these claims. And your choices would show up what your spirituality really was.

That's as true now as it was then, and nowhere more so than in relation to one contemporary discussion around taxation. It has been called 'the ugliest chapter in global economic affairs since slavery'. And, as with slavery before abolition, it is so widely accepted that for years it has excited little or no comment, merely a matter for accountants and lawyers. It concerns the manner in which businesses, in particular multi-national corporations, shift billions of pounds of profits between jurisdictions to reduce, or even dodge completely, their tax bill.

With multinationals, a system called transfer pricing covers the sale between subsidiaries of the same parent company of everything from nuclear reactors to cornflakes. Also included are intangibles for which a price is levied, such as intellectual property rights, management services and insurances. As long as the subsidiaries of the same multinational charge each other a fair market price - known in regulatory circles as an 'arms length price' - such transactions are perfectly legitimate. However, with 60 per cent of world trade now taking place within rather than between multinational corporations, the way fees are determined has become increasingly opaque as arms length pricing is forgotten and the figures are manipulated to reduce tax. Put simply, tax dodging occurs when the cost of these transactions are artificially mispriced, that is, when goods and services are exported at knock-down prices or imported at inflated prices to hide profits and to dodge tax.

What makes this a matter of particular concern is the impact such tax dodging has on the global economy. Poor countries in particular are deprived of badly-needed tax revenues - Christian Aid has estimated the loss at $160 billion a year. Governments raise money through grants (aid), loans and taxation. Of these, taxation is far and away the preferred option. It provides a sustainable and dignified source of revenue. Greater reliance on tax strengthens democratic accountability. Evidence suggests that states that rely on tax revenues are more likely to see the development of responsive and accountable governments. In poor countries where the tax base is very small and millions live on subsistence in­comes, it is shameful that companies which make very large profits from the resources of poor countries should be dodging fair taxes. If that money was available to allocate according to current spending patterns, the amount going into health services could save the lives of 350,000 children under the age of five each year.

People in Britain like to moan about taxes - it's an alternative to the weather. But we depend on them for the wide range of public services that are essential for a functioning and stable society. There is no developed democracy that does not have a highly developed taxation system. William Pitt the Younger first introduced income tax to Britain in 1798. Before that, if you were rich you were more than secure. You held capital, power and almost all the land, especially after enclosure of the commons. If you were poor, part of the vast majority, your life was one of relentless drudgery, grinding poverty and utter insecurity. This is what, deep down, we know about the importance of taxation.
Companies themselves rely on public services in order to function; infrastructure, utilities, transport, skilled and educated workforces, law and order. Yet the TUC estimates the tax gap left in the UK alone by ingenious accounting to be £12 billion each year. In other words, the tax that households pay is being used to plug the gap left by the tax dodging of big corporations. Clamping down on trade mispricing would also bring benefits to the UK, such as a revenue stream that would go a long way to filling the gaps caused by government bail-outs of the financial system.   

And it's not just trade mispricing that is costing countries millions and even billions in lost tax revenue. 'There's a building in the Cayman Islands that houses, supposedly, 12,000 US-based corporations. That's either the biggest building in the world or the biggest tax scam in the world' said Barack Obama in 2008. The US administration is sponsoring legislation to tackle the secrecy of tax havens. 30 of the 70 or so tax havens globally are either in Commonwealth countries, Crown Dependencies or British Overseas Territories.

Nor is it only faceless multinationals that tax dodge on a large scale. The publicly owned David MacBrayne Ltd allowed its subsidiary CalMac-Ferries Ltd to create a company based in the Channel Islands. 650 of the 800 crew working on its Hebridean and Clyde ferries are employed in Guernsey, a Crown protectorate outwith the United Kingdom. As a result, a company whose ultimate owner is the public pays no employers' National Insurance Contributions to the UK government for these 650 employees. This legal tax avoidance scheme has saved the company almost £5 million in the last four years - and this is a company which receives £90 million each year in public subsidy. Scotland's own dear CalMac an offshore … it doesn't bear thinking about!

Widescale tax avoidance, whether legal or not, is problematic from a number of perspectives. In a democracy, citizens enter into a kind of unspoken contract with regard to taxation. Complain about it as we do, debate appropriate levels as we should, there is an implicit understanding that paying our taxes is part of our civic duty and that all of us who enjoy the rights of citizenship should also bear the responsibilities of citizenship. There is widespread anger that people at the lucrative end of the financial sector still don't 'get it.'


tax3.jpgThis is not just fury about the recklessness of investment banking or naivete about global financial systems, about which we have been endlessly and offensively patronized by people who themselves proved culpably incompetent. It is because a fundamental principle of democracy, a social contract, is being profoundly violated; that everyone who enjoys the rights of citizenship should also bear the responsibilities of citizenship. Not paying tax is a violation of democracy.

People are angry at the implication that, as Leona Helmsley once famously said, 'only the little people pay taxes.' They are angry at the continued payment of city bonuses at a time of grave economic crisis, not because they are greedy or envious (most people still have the capacity, traditionally considered to be a mark of mature adulthood, to self-limit) but because tax avoidance, excessive bonuses, secrecy and regulatory loopholes are an insulting rejection of the values of citizenship and democracy by which the rest of us live.

This, I think, can legitimately be described as moral hazard. This occurs when individuals or institutions insulated from risk behave differently than they would if they were fully exposed to the risk. It arises because individuals or institutions do not take the full consequences of their actions and leave others to shoulder responsibility for these consequences. A key principle of the free market economy is that companies and investors bear both the risks and the rewards; that is, when share prices or interest rates are high they are rewarded with good returns, but when these fall, they carry the losses. But what we see happening here is moral hazard. Those who have profited have not had to bear the losses, and they are not even paying the taxes. The costs have been borne by those who do pay their taxes, and they are crippling. Of the nearly 100 banking crises that have occurred internationally during the last 20 years, according to the World Bank, all were resolved by bail-outs at taxpayer expense.

And what is most evident globally is that the most vulnerable, the people who can least afford it, bear the heaviest consequences. For those in the poorest countries already living on the margins of destitution, the financial crisis may well make the difference between life and death - their export orders are tumbling, the investment finance is drying up, money sent by relatives working away in the west is falling, unemployment is increasing and foreign aid is already being cut by developed countries.

The money to realise the Millennium Development Goals is disappearing into a global taxation system that allows the world's richest to evade their responsibilities as corporations, as citizens, as human beings. We could change this and we wouldn't even need a revolution - we just need those who owe it to pay up!

Christian Aid wants to see an end to secrecy and greater transparency from multinationals about their international transactions. In particular, we are trying to influence the International Accounting Standards Board to bring about an international accounting standard that requires companies to report their profits and tax on a country by country basis. Currently they are only required to report a global figure. In addition, we want a multilateral agreement that requires the automatic exchange of tax information between all jurisdictions so that it would be more difficult for tax havens to hide the illicit profits of companies. If we're going to bail out companies, we have a right to know what they're up to.

There are some encouraging signs of progress. In February, the Organisation for Economic Co-operation and Development, supported by the UK government, committed to including a country by country reporting standard in their Guidelines for Multinational Corporations by the end of 2010. Although this will not be binding, it increases the pressure on transnational companies to disclose this information. The International Accounting Standards Board is considering country-by-country reporting in the mining industry. There has also been progress on exchange of information between tax jurisdictions. And in April the European Commission published a communique on taxation and development in advance of the UN Millennium Development Goals summit in September of this year. This is significant as it's the first time the tax and development parts of the Commission have worked together on such a document.

Jesus asked hard questions about taxation and challenged people to make difficult moral decisions, and then live them out as adults who had the moral agency of freewill. How shall we live? Whom shall we serve? He asks the same questions of us today.

Kathy Galloway