A man walks into a bar and orders a pint. The bartender turns to him and says: “€36.80 please”. Thinking this must be a mistake, the man asks the bartender why his drink is so expensive. “Well”, says the barman, “there was people in here earlier who got a meal and a few drinks, but they didn’t pay. We have to pass the cost on to the next customer”.
This is not a joke punchline, but one of several real interactions between a barman and some of his punters, recorded in a Dublin pub as part of a hidden-camera video, to promote Oxfam’s #MakeTaxFair campaign.
Oxfam says the campaign’s purpose is to highlight the injustice of tax deals that assist multinationals, and bring inequality and economic hardship to the societies in which these companies operate.
The video – alluringly titled ‘Ireland’s Most Expensive Pint?’ and shared on Facebook – brings the campaign to a social media audience, and in just over two minutes offers an entertaining simplification of the effects of tax avoidance.
Shots of different customers and the unreasonable barman induce incredulity, and comical threats of violence follow. The barman asks his customers if they think it’s unfair. “Of course it’s unfair”, comes the chimed response.
But the campaign has an unintended side-effect: by ridiculing tax avoidance, it draws down questions of sweeping stringency about the arrangements of Oxfam itself, a multinational, albeit a multinational NGO with Charitable Exemption Status.
“Every single day, we end up paying for those who don’t pick up our tab”, says the barman’s voice at the end of the video, before he’s seen biting symbolically into an apple as if at a dysfunctional iPhone launch.
What gives Oxfam the right to say how other companies should pay taxes?
Might it be its agenda?
Well it is not the purpose of this article to take any issue with Oxfam’s dynamic and progressive agenda. So it’s not about that.
These ads aren’t about that agenda, they’re about tax avoidance, tax cleverality.
So it can only be its approach to tax in itself. It must be because it has a discrete and separate agenda – beyond relief of global poverty – about tax. Sure enough, and unfortunately for Oxfam, it makes this argument itself in its own promotional video. The campaign is #MakeTaxFair not MakeEverythingFair, after all.
So Oxfam can expect, like those it judges, to be held to the highest standards of tax scrupulousness.
In the wake of the release of the Panama Papers, Oxfam’s Irish CEO Jim Clarken made impassioned calls for the closure of legal loopholes that allow companies to avoid paying tax.
“It is not good enough to argue that tax avoidance is permissible because practices fall within the letter of the law”, he told the Irish Times. “All governments, rich and poor, must work to end tax dodging because it is their citizens – their electorate – who are the biggest losers”.
Oxfam is no petty player: it is respected and pioneering. Oxfam’s Irish subsidiary owns almost €4m worth of assets, had an income of €12m last year, and pays its CEO, Jim Clarken, €90,000 a year.
So what does Oxfam do about its own tax?
Oxfam’s retail operations, on which it made just under €1m last year, evoke an interesting comparison to how multinationals pay tax, as both Oxfam and its more capitalistic global peers are affected by commercial rates of tax under Irish law.
Perhaps controversially in the context of the #MakeTaxFair campaign, Oxfam has lobbied the Government, as a member of the Irish Charity Shops Association, to have its retail trading exempted from such rates.
Its tax arrangements in the UK have generated controversy. Richard Teather of Bournemouth University is one critic, arguing that Oxfam and other UK-based charities make use of legal loopholes that look “remarkably like tax avoidance” to avoid paying commercial rates on their shops there.
Outlining Oxfam’s more general modus operandi for the Institute of Economic Affairs, Teather describes how, instead of managing their own shops, charities control their retail operations through a private subsidiary, which then donates its annual profits back to their parent company under a scheme called ‘Gift Aid’.
Set up by the British Government under the Finance Act 1990, Gift Aid was originally intended to encourage taxpayers to donate more money to charity, and works by allowing a charity to claim 25% back on donations made by anyone subject to UK income tax as a form of rebate from the Government, effectively increasing the amount of the donation. In 2006, the scheme was extended to include the operation of charity shops.
In Oxfam’s case, the parent company (Oxfam International) owns Oxfam Activities Ltd. (OAL), whose primary activity is listed as the “recovery of sorted materials”. Last year, OAL ‘donated’ £783,000 to its parent company, tax-free.
Beyond rates and UK-government-encouraged tax rebates, the way Oxfam has seized on news items that have highlighted tax avoidance in the past also opens it to accusations of hypocrisy.
But what would hypocrisy look like for Oxfam?
We must distinguish two things. Firstly ends from means. And secondly philanthropy from profit-making.
It’s a mistake to cloud the morality of tax avoidance in terms of ends and means, to believe that charities should get a free pass because of their benevolence. It cannot be the case that if the end is a good one it is legitimate to be tax-avoiding in pursuit of it.
For example: Oxfam’s end is excellent; BP’s goal is not good; Apple’s is in between. So a certain logic might suggest tax avoidance is merited on a sliding scale that reflects this. But this should not be the case any more than the tax system can be tailored so the benevolent and the wise are levied for less than the malign or profit-obsessed. Such argumentation cuts across the very essence of the fairness of the system. If certain activities or individuals merit favourable treatment it must be effected by exemptions, grants and other policy measures, not by allowing them to game the system, by avoidance.
To promote its agenda, which includes paying its own staff and executives, Oxfam has seized on one of the issues of our time, tax avoidance and made it its own. Seizing on topical scandals – from corruption to inequality to famine to climate change to tax avoidance is largely how charities get ahead.
Highlighting the ramifications of multinational tax avoidance could be seen as particularly rewarding for charity, in Ireland. In October, the majority of respondents to an Irish Times/Ipsos MRBI poll said they agreed with the Government’s decision to appeal the ruling which deprives the Irish taxpayer of €13bn, before interest.
Charities like Oxfam campaign for accountability and legitimacy. One of the tenets of the #MakeTaxFair campaign is to urge visitors to Oxfam’s website to sign a petition, which urges Michael Noonan to publicise the tax arrangements that Irish-based companies have with other countries, in the hope of achieving greater transparency.
The #MakeTaxFair campaign is one of the better examples of a charity adding insight and expertise to the public discourse in a sustained way, highlighting the consequences of tax avoidance in countries like Malawi, where a generous double-taxation treaty signed with the UK in 1955, when the country was still a British colony, has created wide-scale inequality that has seen it become the world’s poorest nation.
Figures from the Malawian government show it lost $125m in tax allowances between 2008 and 2009 alone, equal to the government spends annually on its national grain subsidy, and recent comments from Malawian president Peter Mutharika decried the effect that multinational tax evasion is having on the country. It’s a case that has been almost entirely ignored by Western media.
Oxfam’s own website explains the crippling effect that a lack of funding is having on public services in Malawi, while a campaign by another charity, ActionAid, revealed earlier this year that the doctor-to-patient ratio in Malawi is roughly 1 to 60,000 (in Ireland it’s about 1 to 370, itself below the OECD average).
This is not to suggest that tax fairness offers a sure-shot solution to such problems, but funding issues in countries like Malawi would certainly be resolved if their systems of taxation were made fairer. According to figures from the IMF, tax-avoidance schemes cost developing countries roughly $200bn a year – more than they collectively receive in foreign aid.
Oxfam Ireland’s accounts show that last year it donated over €325,000 to projects in Malawi, more than a third of the net profit made from the charity’s commercial trading activity here. Providing charities with the means to pay less tax on their retail operations, through incentives like Gift Aid, could arguably increase this figure.
Oxfam’s ostensible hypocrisy comes at a time when scandals in the charity sector have put the benefits that they receive under further scrutiny. Questions surrounding the legitimacy and accountability of charities since this summer’s Console scandal have been reflected in the drop in donations since, with one in three charities polled by umbrella organisation, The Wheel, reporting a significant drop in donations.
It is a terrible mistake that Oxfam, one of the most respected charities has unnecessarily opened up a front for criticism.
They might not make your pint cheaper, but campaigns to make tax fair can ultimately reduce exploitation, increase accountability, and enable developing countries to achieve greater legitimacy and the ability to make their own decisions.
However, if the proponents of tax fairness don’t practise it, the campaigns risk setting the goals back. In the case of Oxfam it is probably fair to say that, in Clarkin’s terms, it engages in avoidance, though not of course in (illegal) evasion.
To say the least Oxfam needs to be careful.
Stephen McDermott
