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September 22, 2023

Tax Shaming Works

Martin Sullivan cites a KPMG study from 2005 that was ahead of its time: 

"The main point is not that accusations are often unjustified, but the fact that they are made at all. Tax has news value now and, although often unfounded, 'naming and shaming' attacks on alleged tax avoiders can damage their reputations in the eyes of important stakeholders, which can lead to sharp short-term share price falls and the unwelcome attention of more than one tax authority." 

The above quote is from a 2005 KPMG Report entitled "Tax in the Boardroom" (no longer on-line). Seven years later it is clear the report turned out to be exactly right. All the aggressive tax planning in the news is legal tax avoidance and not illegal tax evasion. But corporations–especially those that sell consumer products or depend on government contracts–need to be careful not to incur the wrath of the public who do not understand that CFOs are just trying to fulfill their obligations to shareholders.

Everyone from General Electric to Apple to Starbucks to Willard Mitt Romney can attest to this. Starbucks is voluntarily (!!!) paying more taxes in the UK because of all the heat they've taken there.

You idiots. You've allowed idiots make you feel shame for doing exactly what you're supposed to do. You're Starbucks! Despite your legal "people" status, you don't have feelings. Do whatever the hell you want. Have some flak issue a press release that simply says, "Everyone who doesn't like our tax liability can fuck right off." No one can resist your free WiFi, enormous pastries, CDs at the register and $5 off one pound of your Christmas Blend (ground). Just go about your business. YOUR VERY, VERY LUCRATIVE BUSINESS.

Sigh. Much like people that throw around tax terms they have no understanding of, tax shaming is something that goes on unabated and people seem willing to accept it because it's inconvenient to a populist narrative to explain the difference between "tax avoidance" and "tax evasion" and it's probably too difficult to have "explanatory journalism" explore the actual root of the problem, which is a tax system that's as tidy as 2-year-old's coloring.

I hope The New York Times is pleased with itself.

The Most Important Intangible Asset: Reputation [Martin Sullivan]

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