Target tax avoidance to get billions for public services

Business leaders and politicians meeting in Davos this week are well aware that modern capitalism needs to answer some big questions if it is to survive. The World Economic Forum is sounding the alarm about social instability. Oxfam is saying 26 individuals own half the world’s wealth.

I believe that all of us involved in business need to be looking at what we can do to reduce inequality, not make it worse. Capitalism without checks is a dangerous machine which can exploit workers, rip off customers and make our societies ever more unequal.

There is an ethical way to do business, which gives back to the wider society it is part of. For me, this includes treating staff, customers and suppliers well. This isn’t just the right thing to do. The success of Richer Sounds has only been possible, in my view, because we try to act in an ethical way. In my experience, ethically run businesses are more efficient and more motivated than those that care only about the bottom line.

There’s one very obvious way in which businesses can give back. The problem is, they usually put a lot of effort into finding ways to avoid it. I’m talking, of course, about tax. These days you can’t open the newspapers without seeing a story about aggressive tax avoidance. It’s endemic. I’ve heard many entrepreneurs say their success is all down to their great talent — they feel they don’t depend on anyone else so are entitled to maximise profits at any cost.

Tax Justice UK calculated Britain could be losing £120 billion to tax dodging. That’s a conservative estimate because we don’t know what we don’t know. Just imagine how much that could help public services when the entire prison system costs less than £3 billion.

I am ashamed to admit I once used a legal loophole myself many years ago to cut my tax bill, but I now recognise how vital it is that business contributes its rightful share. That’s why last year I set up a not-for-profit organisation called Tax Watch, to investigate and expose those wealthy organisations that mistakenly think it’s acceptable to use aggressive tax planning to avoid paying their dues. It also recommends policy proposals to create a transparent tax system that’s fairer for everyone.

If the Government ensured tax avoiders cough up it could bring in billions to fund public services without increasing taxes further on those who are already finding things tough. We also need laws to better protect workers: zero-hours contracts are evil and should be banned (unless requested by the employee), as should penalties for sickness.

If rogue businesses don’t come around then new laws will be needed to force ethical business behaviour and set us on a path to a kinder, fairer form of capitalism. We can’t afford not to do this. In my opinion, if we don’t act, the dam will burst and we will all be sorry.

• Julian Richer is founder of Richer Sounds and author of The Ethical Capitalist (Random House Business Books, £12.99)