Tuesday, 24 July 2012

Avoiding tax and morality

Would you like to pay less tax?  Of course, you would.  You can, for instance, avoid paying tax on your savings by investing in tax-free ISAs, a government sponsored form of tax avoidance and there are other perfectly legal ways of paying less tax.  You can employ an accountant, move your money (if you have that much) to an off-shore account or give money to charity.  But at what point does this become morally wrong?  According to Treasury Minister David Gauke offering to pay tradesmen in cash is the wrong side of the moral line.  He, moral paragon that he is, has never, he said on Newsnight, asked whether he could pay for something cash in hand for a discount adding that ‘if people do that they have to do so with the recognition that means taxes will be higher for the rest.’  So if I pay cash in hand it increases the taxes for everybody else…sound logic but he provided no evidence to support the rhetoric. 

The assault on tax avoidance began last month when David Cameron condemned the use in the past by comedian Jimmy Carr of a Jersey-based scheme as ‘morally wrong’ and in his Budget speech Chancellor George Osborne described tax avoidance as ‘morally repugnant’.  Jimmy Carr, well-known for his acerbic attacks on others now found himself the butt of public anger and quickly did the ‘right’ thing accompanied by public mea culpa.  The problem, however, is that tax avoidance is perfectly legal even if some of its more ‘aggressive’ schemes may not be (though most have not been tested by tax tribunals).  Feigning moral outrage has long been a strategy used by government in the hope that ‘shaming’ individuals will make them act morally often when politicians cannot or will not introduce changes to the rules to ensure moral behaviour will occur.  It’s also a convenient smoke-screen to divert attention away from more difficult issues.  We all know someone who has paid cash in hand or have done it ourselves, so it personalises the issue of tax avoidance while few of us have direct contact with bank bosses or the filthy rich.

The difficulty in the past few months is that the government, by evoking morality as a criteria for paying taxes, have not only moved the taxation goalposts but has also confused further what was already a confused situation.  When is avoiding tax morally right or morally wrong?  Tightening the tax avoidance rules might define things more clearly, though I doubt it.  The government’s scatter-gun approach has still failed to address what for many in the public is the crucial issue, the tax avoidance or evasion of big business and the extremely wealthy.  It is clear that, despite the much lauded Tory belief that ‘we’re all in this together’, in terms of taxation this is far from being the case and that making taxation a moral question is unlikely to have any real impact on business or individuals who still use the rules, quite lawfully, to avoid paying taxes.  As Margaret Thatcher found with the community charge, taxation and trying to moralise political issues can be politically toxic.  Political expediency and morality do not make good bed-fellows.

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