Is taxation a moral issue?
There is an obsession in this country with tax avoidance. It is one that has developed over recent years, started by politicians and whipped into a frenzy by an ignorant media. Tax has become a moral issue but it is one that cannot be fully justified.
The hysteria was stirred up again last week following the leaking of documents held by Panamanian law firm Mossack Fonseca who aided its clients in their offshore tax arrangements. Amongst the names contained within the leaked documents were 12 political leaders including Vladimir Putin and our own Prime Minister, David Cameron.
Putin had transferred money offshore from Russian state banks, including a ski resort. It was however the revelation that Mr Cameron’s late father, Ian, had established an offshore investment fund that got the UK press particularly excited. Although the fund, Blairmore Holdings Inc., was known to HMRC and filed the necessary tax returns with the Revenue, it avoided tax by being managed and controlled overseas. Set up in the 1980s, it was registered in Panama and based in the Bahamas and appointed nearly 50 Bahamian residents in official capacities. The purpose of the fund was to manage the wealth of a significant number of affluent families.
Consequently, questions were then asked of David Cameron about his own tax affairs and rather than coming out with a comprehensive response he drip fed the media with parcels of information which only led to more questions until in the end he made public his own tax return details for the last six years. Not to be outdone, George Osborne, Jeremy Corbyn, Boris Johnson and Nicola Sturgeon have followed suit in this ridiculous publicity stunt.
It also came to light that the PM had been the recipient of two cash sums of £300K bequeathed to him in the will of his stockbroker father who died in September 2010, and then £200K gifted to him by his mother, Mary, just months after the passing of her husband. This enabled David Cameron to receive the monies free of Inheritance Tax (IHT). Had his father left him the full £500K then £70K would have had to have been paid in IHT.
Whilst I am no great admirer of Mr Cameron, nor for that matter the vast majority of those currently in the House, he has done nothing wrong. His tax affairs and those of his father operated within the law and that is the key. Tax is not a matter of morality but rather of law. If governments want to ensure that people pay what they perceive as their ‘fair share’ then it is up to them to produce watertight legislation to achieve that goal.
We need to get back to principles when it comes to distinguishing between tax avoidance and tax evasion and the most quoted legal case on this subject is that of IRC v Duke of Westminster (1936). When this reached the House of Lords, Lord Tomkin said:
“Every man is entitled, if he can, to order his affairs so as that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax.”
It is tax evasion that is illegal whereas tax avoidance is legal. However, over recent years David Cameron and George Osborne have successfully managed to morph the two into one and the same thing due to their continual referral to them being exactly that. This is where my sympathies for the PM end in relation to his recent ordeal. Quite simply he has brought this on himself and he is now reaping what he has been sowing for quite some time now.
Paying tax is not about some sort of moral obligation to volunteer as much money to the state to squander but rather paying exactly what each and every person is due to pay as the law prescribes. Nothing more, nothing less. Who wouldn’t take up the chance to reduce their tax bill provided it was 100% legal and operated within the legislation that Parliament had intended. There are many tax reliefs available within our system. Is organising one’s affairs to make full use of any of these tax avoidance? Of course not but the moralists out there would seem to suggest otherwise.
Some of the political and public outrage over tax appears to be driven by envy which only serves to cloud one’s judgement. That outrage however is fully justified and understandable when people see public figures acting hypocritically and that is where the moral argument holds up.
There is a line to be drawn when it comes to tax avoidance and, for me, that is within the realm of aggressive tax avoidance. Schemes designed to avoid large sums of tax by taking advantage of loopholes within legislation, where it was clearly never intended by Parliament, go beyond the pale and it is difficult to sympathise with those that use such schemes only to see them fail. There are, of course, individuals who quite innocently sleep walk into these arrangements having been blinded by science and assured of a scheme’s legitimacy but these people tend not to be the mega wealthy.
Just like 17th century Salem, nowadays the accusation of tax avoidance will cause the mob to bay for blood regardless of a person’s innocence and that can’t be right.
“There is a line to be drawn when it comes to tax avoidance and, for me, that is within the realm of aggressive tax avoidance. Schemes designed to avoid large sums of tax by taking advantage of loopholes within legislation, where it was clearly never intended by Parliament, go beyond the pale and it is difficult to sympathise with those that use such schemes only to see them fail”
Tell that to the No To Retro Tax lot. Lol
Ok so it takes money to run a country but I think they have had more than enough over the years. What needs addressing is the tax system itself! ! If it was fair every man and his dog wouldn’t be avoiding it including the people making the regulations
correct a morally bankrupt system
taxation need to be fair and trimmed down to a flat rate system
Cameron and Osborne are not the first to try to conflate tex evasion and avoidance. I recall that happening in the 90s.
Part of the uproar is the sense there is one law for the rich, another for the poor and a third for those in power.
Having worked in central government and seen how badly money is spent, particularly in the spending frenzy before the 31 March government annual department accounting deadline, where money is almost literally thrown out of the door to spend it before the end of the financial year, there is no great moral case for paying tax.
If you go into a shop and pay for something, the shop is morally and legally obliged to hand over what you have paid for. This is both a legal requirement to meet the contract between the seller and the buyer, but it is also seen by society as unacceptable to take money for no exchange in return.
However, when you look at how the government (and every government of whatever political persuasion) acts, whilst the law is set up to take tax off the citizens, there is in practice no quid pro quo that the citizens get value for money services (or even anything at all) in return. Governments have broken the moral compact between government and citizens and it is grossly hypocritical for them to pretend that they hold the moral high ground and ordinary people trying to keep as much of their hard earned pay as they can to pay their mortgages, bills and food are somehow deviant. In practice, there is little difference between taxation and a protection racket.
With taxation, the statement is “pay up and you don’t go to jail”. With a protection racket, it is “pay up and nobody gets hurt”. There is very little moral difference between the two – both assume that your money is somehow “theirs” and both show by their actions they feel they have no moral obligations to you once they have taken the tax off you.
[quote name=”Peter”]Having worked in central government and seen how badly money is spent, particularly in the spending frenzy before the 31 March government annual department accounting deadline, where money is almost literally thrown out of the door to spend it before the end of the financial year, there is no great moral case for paying tax.[/quote]
You have equated the morality of paying tax with the potential incompetent waste of / low ROI on the money taken by govt.
I accept the former (hoping the tax system can be made as equitable as possible across all aspects) while being rabidly angry about the latter.
[quote name=”The Q”]You have equated the morality of paying tax with the potential incompetent waste of / low ROI on the money taken by govt.
[/quote]
I don’t think he’s “equated” them at all, in fact quite the reverse: he has shown how they are not linked in terms of cost:benefit to the taxpayer.
Effectively: the very fact that these things are not linked dismisses the moral argument for paying any more tax than one needs to pay.
If further argument were needed, it can be pointed out that we have lost all sight of any cost:benefit at the level of the individual taxpayer – even the concept of having to do some work before you’re entitled to out-of-work benefits (and fairly recently at that).
Peter’s experience makes the argument for paying as little tax as possible on the basis that government will always find a way to spend what they’re given, so limiting their supply to bare-bones needs is desirable.
[quote name=”R”]
I don’t think he’s “equated” them at all, in fact quite the reverse: he has shown how they are not linked in terms of cost:benefit to the taxpayer.
Effectively: the very fact that these things are not linked dismisses the moral argument for paying any more tax than one needs to pay.[/quote]
His telling remark was “there is no great moral case for paying tax.”
There is always a moral case for paying tax.
I give up money in tax in the hope that the govt spends it well enough so that everyone in the country can have the education/health/opportunity that was given to me.
The AMOUNT of tax I pay though is a different issue (is it so high because of wastage or low ROI activity etc) , and not a moral one.
His comment dismantled this “moral case”.
[quote name=”Soprano”]His comment dismantled this “moral case”.[/quote]
Whose comment (and why) ??
This supposed ‘moral case’ to which you allude. There is none, and it is further weakened when one considers that the government funds a large part of its expenditure through borrowing (which is even less removed from consent than ordinary taxation, as it relates to future dated debtors) and subsidised purchases of these bonds through the banking system, i.e. Credit expansion. So it is entirely a pragmatic and not a ‘moral’ issue, and to the extent hat it is one, the moral argument is not on the govt’s side.
[quote name=”Soprano”]This supposed ‘moral case’ to which you allude. There is none.”
If you believe that contributing some of your earnings so the govt can operate the large scale state-infrastructure from which we all benefit is neither something you should do, or “good behaviour” , fair enough.
After all, that is all morals are (a widely agreed set of behaviours that are deemed “good” ) .
[quote]and it is further weakened when one considers that the government funds a large part of its expenditure through borrowing (which is even less removed from consent than ordinary taxation, as it relates to future dated debtors) and subsidised purchases of these bonds through the banking system, i.e. Credit expansion. [/quote]
Should the govt not be seeking to fund its costs solely thru tax ??
If it can but the tax rates would be immense, or cannot ever do so (we expect the impossible) , is another story. But one the electorate should be aware of regardless.
You can make the argument that payment is due where services are provided, but it is only moral to the extent that said services are requested. Let us say that some few services, such as defence (not foreign empire building, just defence), law and order, and maybe some limited infrastructure, are only able to be provided by the government – that is a tiny fraction of the government’s total expenditure. The rest? Well, the entrenched interests on the receiving end of this largesse probably think it is “moral” that the “donors” cough up, but that is in my view a very dubious proposition. So I believe the moral case is pretty tenuous, especially since taxation has become more of a price inflation management tool than anything else.
[quote name=”Soprano”]You can make the argument that payment is due where services are provided, but it is only moral to the extent that said services are requested. Let us say that some few services, such as defence (not foreign empire building, just defence), law and order, and maybe some limited infrastructure, are only able to be provided by the government – that is a tiny fraction of the government’s total expenditure. The rest? Well, the entrenched interests on the receiving end of this largesse probably think it is “moral” that the “donors” cough up, but that is in my view a very dubious proposition. So I believe the moral case is pretty tenuous, especially since taxation has become more of a price inflation management tool than anything else.[/quote]
There are a lot of other services you don’t mention that i’ve no doubt you use (The NHS for example)or you may need in the future if fate deals you a bad hand.
Your post smacks of selfishness. Which is hardly surprising coming from someone who thinks morals don’t come into it.
I’m glad your type are being shut down.
“There are a lot of other services you don’t mention that i’ve no doubt you use (The NHS for example)or you may need in the future if fate deals you a bad hand.”
I’m not sure what you’re trying to argue here. I never said anything about using them – I am discussing services that allegedly only the government can provide, one of which is certainly not healthcare. Even if one assumed it were to be included in that list, however, government spending covers VASTLY more than that. I think this is demonstrative of how it ends up being whatever wishlist people transmute into a laundry list of “rights”.
“Your post smacks of selfishness.”
Ah, when you lack any argument whatsoever, throw in the “selfishness” moniker. As if the moral posturing indulged in by the likes of you by forcing other people to pay for your “championed causes” isn’t selfish.
“Which is hardly surprising coming from someone who thinks morals don’t come into it.”
Right, I don’t think they do and you’ve done little to convince me otherwise.
“I’m glad your type are being shut down.”
I have no idea what you mean by “my kind” or how we’re being “shut down”. Though gloat all you like, whilst you continue to be sheered for services which by your own admission the government vastly over-charges. A hollow victory if ever there were one.
“Should the govt not be seeking to fund its costs solely thru tax ??
If it can but the tax rates would be immense, or cannot ever do so (we expect the impossible) , is another story. But one the electorate should be aware of regardless.”
If the costs are immense – and they are – then yes, the taxpayer should absolutely be aware of how much they are actually paying, or how much of their descendants will end up paying. Why should we want it to be any different? Burying our heads in the sand about the actual costs of this spending is how it ratchets up to such high levels in the first place.
Part of the problem of a highly opaque tax system with a myriad of hidden taxes (and ‘money printing’ certainly counts as one in that it induces an upwards trajectory in price levels, from what they otherwise would have been), it can reduce resistance to increasing taxes, which is bad. Then maybe we’ll see some genuine appetite for tax simplification and reduction…
Good article, but why is this lie for? – “Putin had transferred money offshore from Russian state banks, including a ski resort.”. You know something that no one else does or you want to be part Russia heating propaganda?