The debate on tax avoidance is becoming rather tedious, not least because it isn’t really a debate at all. Not so much a discussion where opposing arguments are made with consideration and logic, but a caterwauling of indignant bobcats.
It begins with entrenched positions. The Left thinks in terms of Them and Us – Them being the rich and Us being the poor. And of course it is the Left that speaks for the poor, and they must explain to Us that tax avoidance is a thing of the Right and represents some sort of oppression perpetrated on ordinary people.
Then it becomes a little more complicated, especially when their people start doing it. Where Ken Livingstone leads, others follow. And when popular cultural figures show their reluctance to pay Titanic proportions of tax they become very confused because culture is a thing of the Left and the people of the Left have no problems at all with paying tax. None at all.
But this is the problem. Tax avoidance isn’t really a Left Right thing. It’s a human thing. After the grandiose speeches in which politicians demonstrate how generous and moral they can be with other people’s money, the reality of human nature reasserts itself. In this case the general wish of people to retain the fruits of their labour.
Give people the option of keeping more of their money, legally, and they will generally take it. If that weren’t true, people would be sending regular cheques above their legal tax liability to the Treasury. But they aren’t. And it just so happens that the wealthy have more opportunity to keep their money because they can afford clever advisers.
But let’s not forget that the less wealthy avoid tax, too. They put money in ISAs, they buy duty free and some do cash in hand work. And yes, the tip you give the waitress she doesn’t declare as income is also tax avoidance. In fact, someone could probably make a pretty good case that these last two are in fact evasion, but let’s not go there. It’s hard to get indignant about the less wealthy trying to keep hold of what little they have. It’s much easier to rile against the rich keeping hold of their much greater sums.
And the caterwauling also comes from the Right, or elements of the Right. When the Left attacks avoidance, the Right reminds everyone that it is legal. But while this is true, it is not of itself a convincing or appealing argument. The politics of the matter is that ordinary people can’t work the loopholes available to the wealthy. They become resentful. And when the Left reminds them that the Right is only concerned about rich people paying less tax because, well, they’re rich and want to be richer at the expense of the poor, they begin to see their point. And in response the Right says again that it’s legal.
Then some see that this argument is not quite good enough and say that it might be legal but perhaps it’s immoral. And then everyone’s confused because people of the Right should not be thinking tax avoidance is immoral, and people of the Left should not be avoiding tax.
And it might well be immoral, in a way, to pay less tax because you’ve got clever lawyers or accountants working for you, especially when it’s clear that trusts and non-domicile and personal service companies were not originally designed for clever people to pay less tax than other people.
And we might well say that this is immoral. But it really doesn’t help, and it probably isn’t true anyway. The people doing this are not immoral; they are human. And human beings, being what they are, when offered the chance to pay less tax in a totally legal way, are quite likely to say OK.
But what is really tedious about this matter is that no one really seems to be listening to these two basic points. People, being human, whether they are of the Left or the Right, mostly don’t want to pay more tax than they have to – and neither do they want others to pay less tax than they do. And if we want people to pay a certain level of tax then we should have a clear and simple tax system that reduces the incidence of confusion and ambiguity that provides the tax expert with such fertile ground.
Our tax system is overly complicated. It is Byzantine. Get rid of all those hiding places that exist in such a system, and the scope for avoidance will reduce. And then we can concentrate a little harder on the evaders out there. That’s the illegal bit. And all political parties can probably agree that if they really want to call something immoral then it might be better to start there.