Is corporate tax avoidance legal or illegal? Here’s a quick answer

What most people, including politicians and some so-called experts get wrong, is the term itself when discussing corporate tax – although the term is much more wide-ranging and concerns any person or any entity that generates money. Simply put – tax evasion means concealing income or information from tax authorities — and it’s illegal. Tax avoidance means legally reducing your taxable income.

 

But Tax Justice Network recently published a long blog entitled “No, corporate tax avoidance is not ‘legal’” which was republished on the Financial Times’ Alphaville blog, and got a lot of attention in tax circles.

The provocative headline, for those who know this terrain, may seem to be plainly wrong. It is contradicted immediately by the Collins English dictionary – and probably by every other dictionary that contains this term.

 

 

Tax Justice Network said: There was the usual fuming and fulminating about ‘socialists’ under the beds and the usual evidence-free ‘doesn’t know what he’s talking about’ assertions, along with some more interesting points. The best collection of responses was in an article for Tax Notes / Tax Analysts, entitled Claim That Corporate Tax Avoidance Is Illegal Sparks Debate.

There were supportive and less supportive responses in the article, but most of them rested on a simple misunderstanding – which was reflected in the article’s headline itself.

Here’s the key point. The blog carefully did not, and does not, assert, that “corporate tax avoidance is illegal.” It was a more subtle but equally powerful point, that corporate tax avoidance is not ‘legal.’

 

In other words, it was a pushback against those widespread assertions, in the media and elsewhere, that corporate tax avoidance is all “legal” (or, worse, that it is ‘perfectly legitimate.’)

 

To put it another way, stuff that is not ‘legal’ isn’t necessarily illegal: it may exist in a grey area of legal uncertainty. And TJN argued that you’ll never be able to draw bright lines between them.

 

 

 

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