I have written many times on this blog about the anti-democratic philosophy of those who promote tax havens. This, I think, reflects the attitudes of the big banks, lawyers and legal firms in our society, all of whom di in my opinion work to deliberately undermine the taxation revenue due to elected governments in a deliberate attempt to undermine their mandate to govern.
Sometimes this is explicitly confirmed. Take this comment on the blog from a right wing libertarian (most of whose comments, I admit, I block):
I condone invdividuals keeping the sweat of their brow and/or spreadsheet. “Breaking” laws which are unjust (e.g.. taxation as currently practiced by many governments around the world) is not a crime, it is an individuals right (bordering on their duty).
Just as I would condone the freedom marchers in the southern US “breaking” laws or refuseniks “breaking” laws behind the old iron curtain.
Tyranny and authoritarianism (even if it is just a little for our own “good”) as practiced today needs it up ‘em at every turn.
Much the same thing was said at a recent Cato Institute conference in the USA by Veronique de Rugy. Richard Teather, a UK chartered accountant, lecturer at Bournemouth University and commentator for the Adam Smithj Institute and Institute for Economic Affairs has also said much the same thing (page 81) when discussing attacks on tax havens by democratically elected governemtns:
This is attacking a classic use of a tax haven, as explained in the previous chapter, in which a person resident in (or otherwise subject to the taxation system of) a highly taxed country places his capital in a tax haven where it can earn untaxed income. While there are many cases where the home country does not tax foreign source income (such as the UK’s non-domicile exemption discussed above), most Western countries have a worldwide taxation system that seeks to tax the worldwide income of its residents (or all of its citizens in the case of the USA). This tax haven income therefore does not cease (legally) to become liable to tax merely by being earned offshore: it is still liable to tax and the investor has a duty to report it to his home tax authority. In practice, however, if the investor does not report his income, then the home country can have great difficulties in discovering and taxing it, particularly if the haven country has strong banking secrecy laws.
While I am not seeking to condone dishonesty or criminal activity, from an economic perspective this is merely another example of tax competition: indeed, it is often necessary behaviour in order to take advantage of tax havens. Without the willingness of some to engage in this sort of activity, tax competition would be much less effective and therefore reduce the benefits that flow from it for the rest of us.
I added the emphasis: what I think he is doing is condoning criminality.
This is supposedly done, you note, top preserve the right to property. This, however, is an entirely false argument. Since property rights are inseparable from the duty to pay tax - both coming from the same source and being indivisible - the right to hold property is equally and exactly matched by the duty to pay tax. So anyone arguing a tax is not legitimate has at the same time to say property rights do not exist or that government is illegitimate. Those are the options.
I think that is what is being said. Those from the right and the financial elite who seek to justify tax crime and the avoidance of obligations to government seek to undermine the state and the society we live in. we need to be aware that the choices to be made are ultimately as blunt as that. And it is the very essence of society that we are arguing for when we defend the right to tax.
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How is the right to hold property equally and exactly matched by the right to pay tax?
@Michael
My logic is noted above
What is wrong with it?
If the Tories are elected in May on a mandate to reduce taxes and public spending, would that be anti-democratic? Presumably then it will be the socialists being anti-democratic for trying to stop cuts. Or does it only work one way?
The failure in your logic is the step that equates the obligation to pay tax (not doubted or questioned) paying as you would like companies to pay, which may be a higher figure.
The Cato Instute (and others’) position, long supported by the courts, is that a tax payer is not obligated to pay any more than the amount required under the law and the tax payer is free to arrange his/her affairs as he/she sees fit, subject to egregiously artificial arrangements potentially being disregarded.
This is remarkably similar to the approach to party funding discussed by Peter Watt (ex-Labour treasurer) in his interview with Andrew Marr on Sunday. Political parties conduct their affairs, including fund-raising, as close to the limits set out in the law. Likewise the motorways might be safer if everybody drove at 55 mph, but there is nothing inherently wrong with the driver who sticks firmly to 70mph as confirmed by their GPS rather than their speedometer.
Dear Richard,
We both know that my comments are not relevant to a UK taxpayer – as you frequently complain on your blog, there are plenty of legal tax planning methods available here. I have not supported or condoned illegal activity.
As for being anti-democratic, that fits you more than it fits me.
You frequently campaign against the policies of our elected government, for example attacking the non-dom exemption (reviewed several times by the government and allowed to continue), or calling for tougher CFC rules and restrictions on the separate taxation of husband and wife (both of which were examined and rejected by the government).
What’s more, you do this not in the legitimate sense of arguing for a democratic change of law but by trying to create a climate where legitimate tax planning (permitted under laws passed democratically by Parliament and interpreted by the courts) is impossible.
Your fundamental assumption, the basis of your “missing billions” calculations, is that people should pay whatever tax you and the Revenue would like us to pay, rather than what Parliament and the courts say we should. That is bureaucratic and anti-democratic.
Regards,
Richard
You say property rights derive from a source, but you don’t specify it. What is the source you think property rights come from?
In human rights declarations (which I see as descriptive not prescriptive), property is often listed alongside free speech, free association, free conscience and other rights like those. Those latter are rights which inhere in natural person rather than being given by any human authority, nor do they have balancing obligations. I think that the declarations aren’t wrong to list property rights alongside other rights.
Of course, the precise legal structure of property rights in any society clearly requires law and government: is that what you’re referring to?
“Since property rights are inseparable from the duty to pay tax – both coming from the same source and being indivisible – the right to hold property is equally and exactly matched by the duty to pay tax. So anyone arguing a tax is not legitimate has at the same time to say property rights do not exist or that government is illegitimate.”
What on earth does this mean – “equally and exactly matched”? How exactly? How does that work if the property one holds is say an interest as a discretionary beneficiary in a trust that invests in an offshore fund that in turn invests in real estate in Bulgaria? Where does the “exact and equally matched” duty of the investor arise? Where are the property rights – those in Bulgaria and those offshore. There are no property rights being safeguarded onshore. So are you saying that people should only be capable to being taxed by the jurisdiction where their property is held? Or are you saying that the UK government will safeguard Bulgarian property rights?
None of these theories work in a globalised, multi-jurisdictional and increasingly dematerialised economy.
I note the comments made here – and the disingenuity in many of them
I am not able to comment today due to time pressure
Richard
Richard,
I cannot wait to read your blog in a few months when, after an administration with some sense of fiscal responsibility has at last come into office, and starts the process of eliminating a few millions fictional public-sector non-jobs, your union friends start applying their usual (highly democratic) tactics to respond.
I would that you will show the same outrage towards the unions when they attempt to disrupt the implementation of the fiscal policies of a (truly) legitimately elected government as you do towards citizens engaging in fully legal tax planning.
We’ll be watching you.
Hmm. I’m with those who worry about (common, not elite) democracy. For example, Once special capitalist interests take over government – which they have fairly done (hence the inclusion, often, of the idea of ‘corporatocracy’, in more and more discussion by all sorts of people) – then talk afterward about the error of going against Parliament has a certain color, Doesn’t it? Just a thought.
“Duty to pay tax”? The law (in this country at least) simply requires that you pay tax in accordance with the rules – as laid down by parliament, rather than to any particular moral purpose.
Although the tax rules tend to work by imposing a levy based on the value of various property rights, that hardly makes the two things inseperable, except in a calculational sense for specific taxes.
I guess they tax in non-democratic countries as well – neither property rights nor taxes require democracy.
I guess your authoritarian tendancies are showing out today 🙄
@Edouard (London Expat)
I don’t like the Tories’ economic policy
But they are democrats
and they are seeking a mandate
I will oppose them legally
What I’m objecting to is the use of criminal methods to undermine democracy
Which is something very different indeed
In other words – as usual all you say is complete rubbish
@alastair harris
I have never argued otherwise
There is no voluntary basis for paying tax
But nor can anyone condone the illegal evasion of tax, as those whose writing I am highlighting appear to be doing
Get your facts right
It would help your argument
As it is you have not got one
@Alex
Simply not true
The person I quoted speaking at Cato asked whether tax was legitimate and therefore whether a person had obligation to pay it
I noted no sanction on her for saying so
This is a million miles from any form of tax avoidance
@Richard Teather
As a British author writing in a book published in the UK for a UK think tank without the qualification you now say existed being stated it seems a bit rich to think that I should have been able to ‘read it in’.
But let’s assume I do and now note that you don’t condone tax evasion in the UK. Where do you condone tax evasion, which must follow from the qualification you have offered?
Please enlighten me.
And as for participation in democracy being anti-democratic – what a very, very odd argument. I thought it would be evidence of faith in it. A little better than suggesting tax evaders provide social benefit, don’t you think? And just a touch more responsible for a chartered accountant?
Richard
@Philip Walker
It is very obvious that property rights are established and maintained by law
And so is the right to tax
How do you differentiate them?
Aren’t they both, after all, property rights? One of the government, the other of the individual
And please don’t argue the government is not a natural person. Nor are companies in that case.
@mad foetus
If I receive income I do in most cases have a duty to at least declare that fact to HMRC in the UK, and pay tax if appropriate
I cannot enjoy the income without the resulting obligation
They are inseparable
Thanks for the reply.
Neither governments nor companies are natural persons, sure. That’s a straight legal point. But then, I’d be quite willing to say (contra, interestingly, the ECHR, which extends fundamental rights to legal persons) that governments and companies don’t really have rights: people do. Actually, thinking about that, haven’t I heard it somewhere before? 😉 Being serious, I suspect that probably does explain some of the differences on this point.
I’m sceptical of the idea that property rights can only exist in the context of law, if that’s what you were saying. I wouldn’t like to live in the absence of law, but we would still have the right, in principle, to own property, albeit much harder to defend. I think there is a distinction between the specific uses of the right (e.g., my ownership of the computer I’m writing this on) and the more abstract right to own property in the first place. That right is an inherent dignity of our humanity, rather than something established by law. Put it this way: in the absence of a legal system, would we still have the concept of theft?
As for tax, I’m not sure I would see tax as a ‘right’ of government so much as a duty of citizens. It’s our side of the social contract. If tax is a right of government, then it appears that all property is treated as belonging to the state first of all. You can’t establish property rights for different persons over the same piece of property; well, not without problems!
The right to tax is a property right of the government? Is that what you are saying? That is a new one to me.
Taxation and property rights are quite distinct. You can be required to pay tax without holding property. You can hold property and if you don’t earn income (or have some other taxable event), that doesn’t affect your property rights one bit. Quite distinct.
A bit like saying the government makes laws about dangerous dogs and about smoking, so dangerous dogs and smoking must be linked. They having nothing in common except they happen to be activities of the state.
Can you also please clarify what you mean by the following:
“This, I think, reflects the attitudes of the big banks, lawyers and legal firms in our society, all of whom di in my opinion work to deliberately undermine the taxation revenue due to elected governments in a deliberate attempt to undermine their mandate to govern.”
Do you stand by the use of the word ‘all’?
@Juliet
‘All’ was applied to the collective ‘banks, lawyers and legal firms’ (which actually should have been accounting firms)
So all does not mean all banks etc did this. But elements of all three did
Having said which – I’ll be clear, those operating in tax havens do, in my opinion, seek to undermine the taxation revenue of elected governments. Why else are they there? And isn’t denying someone a revenue stream a deliberate attempt to undermine their mandate to govern? After all – they cannot fulfil their mandate without tax revenue – that’s for certain
You can disagree – but I have the right to that opinion
And I can say that without for one minute suggesting any acted illegally
Richard
[…] Mr. Murphy: Since property rights are inseparable from the duty to pay tax – both coming from the same source and being indivisible – the right to hold property is equally and exactly matched by the duty to pay tax. So anyone arguing a tax is not legitimate has at the same time to say property rights do not exist or that government is illegitimate. Those are the options. I think that is what is being said. Those….(…)… who seek to justify tax crime and the avoidance of obligations to government seek to undermine the state and the society we live in. we need to be aware that the choices to be made are ultimately as blunt as that. And it is the very essence of society that we are arguing for when we defend the right to tax. […]
“If the Tories are elected in May on a mandate to reduce taxes and public spending, would that be anti-democratic?”
Given that they are unlikely to get more than about 35-40% of the vote, then yes it would be (just as the current administration is also undemocratic, having only been elected on 35% of the votes.) Until we get proportional representation in this country, the likelihood of a government with a truly democratic mandate is minimal (unless we get some kind of coalition after a hung parliament.)