Pay your taxes – and a living wage

From Dr Marco G.D. Guidi.

Sir, It is important that private companies that win large public contracts pay tax (“Public contract suppliers under fire on tax”, February 13). Governments awarding large contracts to domestic and multinational private companies do have the legal and moral right to demand that the latter not only pay tax but must also pay the least well-off employees a living wage.

The fact is that many states in the US require private companies that win public contracts to pay tax and a living wage (even the state of New York wants to introduce living wages to large public contracts). This shows that both socialist and democratic capitalist societies understand the issues of inequality and the need to ensure that their market economies are inclusive, ie they allocate resources and distribute wealth and income to all citizens in a fair way.

Multinational companies that avoid tax have an unfair competitive advantage over domestic companies that do pay tax. If things do not change our disadvantaged domestic companies will increasingly not win public contracts and thus more of them will go to the wall.

Private companies must adhere to their legal and moral obligations to society. For their part, governments need to ensure that their tax regimes are not stifling economic growth and not disadvantaging domestic companies through high corporation tax and VAT, which stifle incentives to create, produce and invest.

Marco G.D. Guidi, Adam Smith Business School, University of Glasgow, UK

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