The Morality of Tax Avoidance
(I was going to entitle this post "Why Britain is Sc**wed", but that just seemed to invite the response "Let me count the ways.")
Today's exhibit is the leading article (i.e editorial) in The Times (of London). The Times, you will recall, is a Murdoch paper. It is entitled Morality, Money and Tax. Some excerpts:
The defence that tax avoidance is within the law is no real defence at all. There is no moral case for most such schemes and the loss to the nation is too great.
Tax avoidance is not justified solely by the plea that is it is within the law. Tax avoidance is a way of playing the system to gain reward that has not genuinely been earned. It is, indeed, a form of cheating.
There is a moral cost to this avoidance. The goods that we share in common, the public services that a developed nation needs, the welfare state that a civilised nation requires, have to be funded out of a general pool of taxation.
The vast majority of people, hard-working and not at all wealthy, have no option other than to contribute their reasonable share. It is simply an abnegation of moral responsibility entirely to opt out of collective financing for great personal gain.
It is time to end the gaming of the tax system. Ordinary people are taxed on their income and expected to pay it; wealthy people are taxed at higher rates on their much higher incomes and invited to avoid it. The avoidance damages society. It robs the Treasury of the money it needs to fund services to the public, while leaving the public with the sense that, for some people, the normal rules don't apply.
This is in the context of a Times 'investigation' into taxpayers participating in schemes that take advantage of tax breaks introduced by the (Labour) government in 1997 to encourage investment into film production.
A terminological note: 'tax avoidance' is just legally reducing the incidence of tax; 'tax evasion' is failing to pay an amount of tax actually owed; and 'tax fraud' is committing fraud (e.g. forging a document) to reduce the incidence of tax.
Note the underlying logic of the article:
- The nation and the state are the same thing.
- Not paying something to the government is a 'gain' to the person not paying it.
- The only means by which collective action is possible is the state.
- Civilization = welfare = the welfare state.
- Confiscation of income by the state is normal.
This is the voice of the establishment.
The Conservative (but see, generally, James Delingpole) Prime Minister, David Cameron, weighs in to say that the entirely legal tax planning of a private citizen (albeit the deeply hypocritical Jimmie Carr) is "quite frankly morally wrong".
What think the Ricoteers: is Tax Avoidance morally repugnant, or is it in fact a moral imperative? And can Britain be saved?
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May '12
Re: The Morality of Tax Avoidance
Tax Avoidance and Tax Competition (cf Dan Mitchell@Cato) are moral and good for encouraging states to behave responsibly through fiscal responsibility, sane tax regimes, and efficient bureaucracies. People can leave a nation as easily as they came. The US has benefited tremendously from nations too foolish and greedy to let their citizens pursue their dreams and prosper. Obama may change that dynamic.
This is why welfare-state Europe via the OECD has targeted tax havens. It has a vested interest in getting everyone else to become as bloated, inefficient, and tax punitive as they are instead of making changes to become competitive.
The UK is doomed. Despite being run by Dave-O the CINO is not run responsibly. The 2010/11 UK budget(Year 1 of Tory/Lib Dem govt.) saw the government spend ₤637+ billion, by 2016/17 that budget will have INCREASED to ₤711+ billion.
That's not cutting spending, nor is it anything resembling ‘austerity’. It's just not blowing out the budget in the same fashion ZANU-Labour did.
Mr. Carr can stay in the UK, he's not that funny. I'd much rather have Harry Enfield(NSFW) & Paul Whitehouse over here.
Apr '11
Re: The Morality of Tax Avoidance
What is morally repugnant is the widely accepted assumption that all money belongs to the government and that any earnings an individual gets to keep is somehow a "Tax Expenditure"; an unearned boon granted at a cost to government.
Paying more taxes that one owes is not patriotic, despite with Joe Biden thinks. Paying taxes has no moral component, though it can be argued that levying taxes does.
Tax evasion is a crime and the guilty are rightly subject to all of the opprobrium society can heap on them. All due praise, however, to the person who can minimize his tax bite because Tax Avoidance requires a full understanding of the tax laws, meticulous bookkeeping, and a sharp-witted tax adviser.
Jun '10
Re: The Morality of Tax Avoidance
The answer is no to both questions.
Apr '12
Re: The Morality of Tax Avoidance
Tax is a necessary evil because society needs organization. Different people have different expectations and standards. So having the privaledge to live in a well organized society has its membership fees. The place is kept maintained, peaceful and money from members gets paid out to various programs and special projects, allocated by the elected board. The problems happen when that board is no longer trusted to be working for the membership but has picked some special interest groups, like those Wall Street bankers who got their bail outs and ridiculous bonuses, or for public sector unions and their pay and retirement benefits, or ( as in the UK)allowing in voting groups such as immigrants who will vote for the welfare state. We all know the standard of "equality" goes up until every welfare home has flat screen TVs. Is tax evasion repugnant? Whois creating these loopholes? Is it the comedian? No. Leave the guy alone. What is repugnant is the sway of lobbyists creating loop holes which is shocking, is hurting government neutrality, and it is hurting the free economy, which no longer exists. The USA has the same problem and Canadian businesses get disgusted visiting Washington.
Jun '11
Re: The Morality of Tax Avoidance
I'm in London this week and was greeted by the "morally wrong" quote from the prime minister when I opened my Daily Telegraph this morning. I was so outraged I had planned a short post on Ricochet with this title: "Can we please dispense with the title 'conservative' when describing David Cameron?"
If I were to add that to your list of questions, genferei, it would give me one thing to reply "yes" to....
Sep '10
Re: The Morality of Tax Avoidance
This is the collectivist mindset, through and through. Trying to apply moral principals to the State - that is the State is something of a god, a force for good and to imply that there is a moral obligation that goes beyond the law is a dangerous precedent. The State makes laws the state does not make moralities.
That "conservatives" and Rupert Murdoch are peddling this makes me want to puke.
Aug '10
Re: The Morality of Tax Avoidance
If tax avoidance is wrong -- that is, if not giving the State more than it legally demands of you is wrong -- then what's right with any of us who don't send voluntary contributions to the government in excess of our taxes?
After all, if you want to give the IRS more money than it says you owe, the IRS will cheerfully accept it. Yet the world is filled with "socially conscious" millionaires (actresses, for example) who, as far as I know, do not charitably contribute to the IRS, even when they spend millions on other charitable causes. Why?
Because paying more than what you legally owe to government is not a moral duty. It can't be.
Aug '10
Re: The Morality of Tax Avoidance
Murdoch is hoping to curry favor with the government to make up for his disgrace over the newspaper spying crimes.
If a government performs its job well, and people feel they're getting their money's worth, they won't avoid paying taxes as much. Some countries have this reputation.
May '12
Re: The Morality of Tax Avoidance
Tax Avoidance is not easy. You invariably pay part of the taxes you avoid paying to the people who help you avoid paying taxes.
In this sense, accountants and tax attorneys are like, well, attorneys. Their services are useful and often necessary, but, while not necessarily onerous or unpleasant, certainly the kind of services not to take advantage as a a recreational activity (unless you swing that way - and some people do).
The less punitive and complicated the tax regime, and the clearer the benefit of the services rendered that are payed for by taxes are, the more likely people who can afford to avoid paying taxes will choose not to.
That is, unless they take pleasure in Tax Avoidance. In which case they are as free to do so as boxing fans are to pay for ringside seats.
Edited on June 21, 2012 at 4:33pmMay '12
Re: The Morality of Tax Avoidance
I tried copying my comment into a Letter to the Editor, but it seems those bastards are hiding behind a PayWall.
Mar '11
Re: The Morality of Tax Avoidance
Can Britain be saved? I fear you answered your own question in the quote you excerpted from the Times:
genferei:
The fruit of your own labor does not belong to you, it is a "reward" which has not "genuinely been earned". When a society adopts the view that a man's property is a mere dispensation from the State it is beyond saving.
May '11
Re: The Morality of Tax Avoidance
Judge Learned Hand said it best
"Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes.
Oct '10
Re: The Morality of Tax Avoidance
Jim Ixtian: Tax Avoidance and Tax Competition ... are moral and good for encouraging states to behave responsibly through fiscal responsibility, sane tax regimes, and efficient bureaucracies...
This is why welfare-state Europe via the OECD has targeted tax havens.
It's not just welfare-state Europe, but welfare-state USA that has been targeting 'tax havens'. The US Treasury is carrying on a multi-year attack on Switzerland - a staunchly supportive member of the West - with the entirely foreseeable consequence of driving business to Singapore, and the valuable intelligence such business provides to the Chinese.
I fully agree that Harry Enfield is funnier than 100 Mr. Carrs.
Oct '10
Re: The Morality of Tax Avoidance
Is tax evasion a crime? Or is it an administrative offence?
You raise an interesting question: what is the appropriate degree of moral opprobrium which attaches to tax evasion? For example, if someone knowingly pays $5 in tax when they know $10 is due, is this most like:
- Not giving a big enough tip
- Not telling the cashier she's given you too much change
- Buying a child's ticket at the cinema for your just-too-old-to-be-a-child son
- Leaving too little in the farm-gate honesty box for the corn you bought
- Taking $5 from the offering plate at church
- Stealing $5 from an unattended till at the drugstore
- Stealing $5 from the cashier at the drugstore by holding them at gunpoint
- Setting off a dirty bomb in downtown Chicago
- Being a Chicago machine pol
- None of the above.
Edited on June 21, 2012 at 6:43pmOct '10
Re: The Morality of Tax Avoidance
If only it were that simple. The Times endorsed Labour in every general election between 1997 and 2010. (The Financial Times and The Economist were also consistent Labour endorsers until the last UK general election.) The British establishment is thoroughly statist and pervasively Keynesian. There has now been super-added a contempt for material success masking a corrosive envy.
Delingpole and Stanley stand out from the crowd too much for comfort - theirs, no doubt, and that of all liberty-loving people.
Oct '10
Re: The Morality of Tax Avoidance
Some of today's letters might cheer you up:
I love this last suggestion. Perhaps a big parade, in the Red Square tradition, to honour these tax heros.
Nov '11
Re: The Morality of Tax Avoidance
[deleted]
Edited on June 21, 2012 at 6:52pmOct '10
Re: The Morality of Tax Avoidance
David Knights: Judge Learned Hand said it best
"Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes. "
But then he went on to hold that despite the taxpayer having fulfilled every requirement of the statute to avoid tax, this could be disregarded because there was no purpose for the transaction beyond reducing tax. And thus the slope was thoroughly greased.
Jun '10
Re: The Morality of Tax Avoidance
So, according to these folks, I should not claim all my mortgage interest or charitable contributions as legitimate deductions?
The idea is moronic.
How about a flat tax that sets a very low uniform tax rate and eliminates deductions? Fine by me. I doubt the author of the article would consider that to be moral.
Edited on June 21, 2012 at 8:05pmMar '11
Re: The Morality of Tax Avoidance
A little bit says a lot.
Edited on June 21, 2012 at 8:05pm