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Multinational Tax Avoidance: Virtue Ethics and the Role of Accountants

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Abstract

The techniques that some large multinational corporations use to reduce their tax liability have come under increasing public scrutiny in recent years, alongside governmental investigations and international commitments aimed at curbing opportunities for tax avoidance. Although discussion of tax avoidance activities, and their regulatory responses, is often conducted with reference to moral concepts (such as ‘fairness’), philosophical analysis of the ethics of multinational tax avoidance remains limited. In particular, the virtue ethics tradition that emphasises the agent (and his/her character) and the performance of specific roles has not been considered in detail. This paper examines how the contemporary virtue ethics of Alasdair MacIntyre can be applied to the issue of multinational tax avoidance, and considers the role that accountants play in these activities. It argues, firstly, that MacIntyre’s approach provides a more useful philosophical analysis of the issue (when compared to utilitarian and deontological approaches for example) and, secondly, that the main parties involved (MNC accountants and regulators) are likely to agree with the main tenets of this approach. The paper also contributes by reconceptualising, using MacIntyre’s scheme, the issue of tax avoidance in relation to Donald Cressey’s ‘fraud triangle’.

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Notes

  1. Reference is sometimes made to ‘egregious tax avoidance’ as being of particular interest. However, this is not adopted as the term ‘egregious’ itself suggests a value judgement. Instead, the approach adopted in this paper is to review the issue of tax avoidance from different moral perspectives, such that any moral judgements would be the result of this review, rather than being pre-supposed.

  2. Note that this remains the case even if the MNC is itself considered to be a moral agent [French (1979, 1995), but see Velasquez (2003) for an alternative view]. However, in so far as it is possible to examine and evaluate the activities of human agents acting in specific roles within the MNC, this is considered preferable (in terms of allowing for a more specific and nuanced analysis) to examining the MNC as a collective.

  3. Such as through various stakeholder engagement initiatives and processes; see Jeffery (2009) for examples.

  4. See also Xu’s (2004) study that highlights the role of non-pecuniary motivations in starting new businesses.

  5. One could argue, however, that there may be some circumstances in which accountants, even having accepted the goal of fair presentation, would be justified in ignoring the concept of substance over form—such as when doing so would result in less tax being paid to an oppressive government (apartheid South Africa, for example). However, as such a choice is made qua accountant, the onus would be on him/her to justify why the pursuit of fair presentation (substance over form) ought to be overridden.

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  1. School of Accountancy, QUT Business School, Queensland University of Technology, Brisbane, QLD, Australia

    Andrew West

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West, A. Multinational Tax Avoidance: Virtue Ethics and the Role of Accountants. J Bus Ethics 153, 1143–1156 (2018). https://doi.org/10.1007/s10551-016-3428-8

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