I have no doubt that many accountants, lawyers, bankers and company directors will dismiss yesterday's call by the Observer for a moral crusade against tax abuse on the basis that morality has no place in tax.
It is an argument heard time, after time, after time. And it is always wrong.
The argument relies upon the assumption that tax evasion is illegal and tax avoidance is legal and that anything legal is therefore acceptable and so may be done.
There are many things wrong with this argument.
First, it is no longer true that all tax avoidance is legal. The General Anti-Abuse Rule has changed that, forever. Tax avoidance and legality can no longer be equated.
In that case tax avoidance and morality cannot be equated, even if legality and morality had equivalent status.
But of course legality and morality have never been equivalents. Those who argue they are either offer the defence of the soldier 'only following orders', which has never been acceptable in law, or instead imply we should do anything that's legal. We all know of things that are legal we would never countenance doing.
So we exercise choice. That's inherent in our free agency which underpins our model of personal responsibility for our actions.
And no one has to use a tax haven.
No one has to find and exploit loopholes in the law.
No one has to hide their actions from view when they should be accountable for them.
No one, least of all someone of means, needs to free-ride a system.
Those are all choices. They are moral choices. They are wrong choices.
But never deny that a person making that choice is exercising moral judgement, even if it is bad judgement. And never accept the excuse of the person doing so that there is no morality in taxation. That's just their excuse for their own misconduct. That the excuse is made so often is so the best indication there is of how common that misconduct is.
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It was pleasing to see tax avoidance/evasion issues being mentioned quite frequently in the various discussions at the ‘Progress’ Labour conference ( Building a majority Britain) on Saturday and not just by Margaret Hodge.
My guess is Labour can get far more out of this especially as figures mentioned were still in the low billions ( like 30 billion); Am I not correct in thinking your figure of lost taxation money is at least twice this or more? . For Labour it can be such a ‘cost effective message’ because it shows lessons learnt from the 2000s, that we are no longer as relaxed on letting the rich off lightly, that we are heading more towards that One-Nation Britain which he so eloquently advocated by Ed Milliband at the conference. But Margaret Hodge needs to be in there too with the top team who are making the future decisions on these business matters and needs to be used by that party to reach out to all those lost alienated souls including youngsters and women who do not vote or have drifted to UKip. Margaret can reach others as she has the language ability to talk straight and not look like another political professional.
I think £20 billion at least could be raised
I am under no illusion we can stop all abuse
Peter, as a Progress member(?)(that’s you not me!),I would like to see your comment on Richard’s blog When will Labour learn that neoliberalism will never work, and most especially for the left?
You’ll love this.
I found this comment on a blog about the NotToRetroTax campaign
Not only has this person (whom i assume from his previous comments to be an IT contractor earning £100,000+) paid hardly any tax in 7 years, he’s been out of the country for 8 years, but thinks he deserves a UK state pension. You couldn’t make this up :
“Just wander[sic] if someone can advise me about [Self Employed Class 2 NICs], this is what we used to pay during the MTM scheme as self employed. __I left the UK 8 years ago but I still get these requests and I have continued to pay these as I wanted to ensure I kept my state pension benefits, however I am now begining to question this as I am obviously not self employed in the UK anymore,.
Hence, if I keep paying will I still be entitled to my state pension? if I stop paying should I try and claim these back for the last 8 years? ”
(http://forums.contractoruk.com/accounting-legal/77944-no-retro-tax-campaign-against-section-58-finance-act-2008-a-342.html)
If *that* right there isn’t the definition of a benefit cheat i don’t know what is.
Agreed!
But questions of morality are notoriously difficult to agree on. Are citizens able to follow their moral codes and not the law? Possibly in a democracy they may put the moral code above the law and suffer the consequences. A convinced pacifist might morally refuse to pay that part of their personal tax which is used to support the UK’s defence spending, or that part relating to the nuclear element. The same could be true for people with very strong views on other issues.
I thought the General Anti Abuse Rule only applied to abusive arrangements? The Guidance Notes say “B3.1
The primary policy objective of the GAAR is to deter taxpayers from entering into
abusive arrangements, and to deter would-be promoters from promoting such arrangements. There may be tax avoidance arrangements that are challenged by
HMRC using other parts of the tax code, but if they are not abusive they are not
within the scope of the GAAR.”
And in the context of the often challenged moral behaviour of international companies the Notes say “The mere fact that arrangements benefit from these rules does not mean that the arrangements amount to abuse, and so the GAAR cannot be applied to them. Accordingly, many cases of the sort which have generated a great deal of media and Parliamentary debate in the months leading up to the enactment of the GAAR cannot be dealt with by the GAAR.”
I think you need to read more of the GAAR
Richard,
Apart from anything else, you have misunderstood the definition of tax avoidance. Once an avoidance is ruled illegal it becomes tax evasion, by defintion.
Morality is subjective, therefore one persons evasion is another’s morality. Therefore, the concept is unworkable in a practical system.
Charlie
I have to disagree
I think I really do understand what is now meant by avoidance
Remember, I helped write the rules
The OECD definition of avoidance:
A term that is difficult to define but which is generally used to describe the arrangement of a taxpayer’s affairs that is intended to reduce his tax liability and that although the arrangement could be strictly legal it is usually in contradiction with the intent of the law it purports to follow.
EVASION — A term that is difficult to define but which is generally used to mean illegal arrangements where liability to tax is hidden or ignored, i.e. the taxpayer pays less tax than he is legally obligated to pay by hiding income or information from the tax authorities.
That is not the UK definition
I thought you’d just contributed to the guidance on how the rules should be interpreted?
Contributed is the key word
And this was not the rule I wanted
Yes, I thought it was the key word too.
Writing the rules you want, and helping with the guidance notes on rules you didn’t want, are very different things.
Charlie,
The GAAR defines the difference between tax avoidance within the spirit of the law (eg. ISAs, SIPPs etc …) and tax avoidance falling outside of the spirit that parliament intended (Aggressive, artificial loophole abuse).
That should go some way in clearing up any confusion for those who find it “difficult” to reconcile morals and the law.
I think I could repeat my comments with ‘spirit’ replacing ‘morality’.