Tax avoidance is a failure of law, and it is lawmakers who should be blamed.No one is obliged to volunteer more tax than the law demands.
— David Allen Green (@DavidAllenGreen) June 18, 2012
It’s hardly an uncommon view, and on the face of it a persuasive one: why would anyone choose to pay more tax than they were legally required to? What, when you get right down to it, is the difference between putting down your actual income on your tax return so HMRC charges you the right amount, and hiring an army of accountants and lawyers to funnel millions of pounds of your money through a holding in the Channel Islands so you only have to pay an effective tax rate of 1% on what you earn?
Putting the argument in these terms – I hope – makes it a bit clearer why this view is a lot less plausible than it initially seems. It essentially says that where tax is concerned, your civic duties begin and end with you strictly obeying the letter of the law. But we don’t think this about pretty much any other area of life. We don’t think that the blame for alcoholism and all its associated anti-social behaviours lies with MPs for failing to bring in a 21st century version of Prohibition, or that queue-jumping is the fault of legislators for not making those who don’t observe proper line etiquette subject to legal sanction. It’s neither desirable nor possible to ban all forms of selfish, anti-social behaviour. And that, at root, is what tax avoidance is. If you accept that tax is necessary for society to function, and that it even allows for the existence of one or two things which Jimmy Carr probably finds quite useful, like public roads and hospitals (he might have private insurance, but even millionaires will probably use NHS A&E departments), then it follows that using legal loopholes to get out of paying your fair share of tax (where the amount you’d be paying if all your earnings were declared as personal income can be taken to be a – very – rough proxy for your “fair share”) is free-riding on the money paid by others, and about as good an example of anti-social behaviour as any other you can name.
Of course the rules on tax avoidance should be tightened up as far as possible, but, as Chris Dillow has pointed out, tax morale –one’s willingness to pay, rather than attempt to avoid tax – matters too. Chris has also said he’s sceptical about the possibility of altering tax morale, but on this I’m inclined to be rather more optimistic, for reasons that the Jimmy Carr affair highlight rather well. Tax avoidance has attracted great public attention recently, thanks in no small part to the actions of UKUncut. The Jimmy Carr story was originally broken by the Times, and was then picked up by the Telegraph. In both cases the coverage was unambiguously negative, while David Cameron’s criticism of Carr seemed to meet with the tacit approval of the Sun. If we’re at the point where a Conservative Prime Minister and three overtly rightwing national papers are taking stands against tax avoidance – whether it’s because they’re cynically playing to the public mood or not – then I think it’s safe to say things are shifting in the right direction.