The real dodgers are those obsessed with tax avoiders
Scapegoating the rich has become a way of dodging economic debate.
‘I’ve not broken the law. I’ve not done anything illegal. But morally, morally…’ Comedian Jimmy Carr’s deadpanned quip during a gig in 2012, when his involvement in a tax-avoidance scheme was generating a lot of political heat, captures what appears to be the connundrum at the heart of the ongoing arguments over tax avoidance. That is, tax avoidance is legal, as anyone fingered for it is quick to point out – it simply means paying as little as the law requires. But that doesn’t make it right, as anyone crusading against it is equally quick to point out. Because morally, morally…
Those claiming that they’ve done nothing wrong, as the Tory donor Lord Fink did last week, following Labour leader Ed Miliband’s suggestion that Fink’s tax affairs were ‘dodgy’, are seemingly up against the political class as a whole. Over the past six-or-so years, politicians from across the political spectrum have all been singing from the same hymn sheet: tax avoidance is a moral issue. Its perpetrators may be adhering to the letter of the law, but they’re violating its spirit.
As early as 2010, the Lib-Con coalition was already busy framing tax avoidance as a moral issue, announcing several legislative changes designed to tackle the issue, including the introduction of a General Anti-Avoidance Rule (GAAR). The GAAR, which was passed into law in 2013, overturned the precedent set by the 1936 Duke of Westminster case that asserted no one could be compelled to pay more tax than is required by statute. This meant that paying as little tax as required, while not illegal, was no longer acceptable. The terrain for moral intervention was opened up. Politicians were quick to take advantage, be it prime minister David Cameron taking time out of a diplomatic visit to Mexico in 2012 to denounce Carr’s tax affairs as ‘morally wrong’, Chancellor George Osborne using his 2012 Budget announcement to condemn tax avoidance as ‘morally repugnant’, or Miliband declaiming a year later that ‘[tax avoidance] is scandalous, it’s got to change. The next Labour government will change it.’
Such has been the moralising mood music around the tax affairs of wealthy individuals and large, largely unpopular corporations, such as Starbucks and Google, that it is now almost taken as a given that how much tax one pays is a moral issue. It’s about paying your fair share. It’s about honouring the social contract. It’s about putting in what you’re getting out. And those who are not playing fair, those who are exploiting tax laws to reduce their liabilities, those who are ‘aggressively’ paying as little as legally possible, are now ripe for vilification.
But are things really as clear cut as the tax moralisers make out? In one sense, tax avoidance is unavoidably a moral issue. That’s because the Byzantine intricacies of the tax code (1,200 pages and counting), replete in loophole-creating exemptions, allowances and incentives, have transformed the straightforward legal requirement to pay tax into a choice as to how much tax to pay. It is then up to individuals and companies (time and money for accountants permitting) to decide what to pay. But even then, there is nothing inherently virtuous about paying more tax than the state legally requires. And there is nothing morally worthy about lining the state’s coffers. After all, while the state uses tax revenue to provide many vital public services, it also spends billions on the latest weapons of mass destruction and, yes, bank bailouts. Perhaps, just perhaps, those avoiding paying more tax than legally required are spending their saved cash on something more worthwhile than an Apache helicopter.
So while it’s not clear that how much tax one pays is the index of moral worth that campaigners and politicians have been cracking it up to be, there’s no doubt that it has been constructed as a moral issue. It may not be a moral issue, like murder or lying, but it is represented as one. Why has this happened? Why has an issue that, 10 years ago, was a wonkish concern for political pedants, a nostrum beloved of the socially inadequate and Lib Dems, been transformed into one of the dominant themes in the run-up to this May’s General Election?
The answer lies in the way Britain’s political elite, and its media cheerleaders, responded to the economic crisis. That is, since the sub-prime mortgage crash in 2007 began popping credit bubbles throughout Western economies, the prevalent narrative that emerged has involved greedy bankers and gullible, stuff-wanting citizens. This made sense for a clueless elite. Faced by deep-seated structural problems in the economy, structural problems for which they and their predecessors were culpable, they were only too happy to avert their eyes. But their gaze also needed another object on which to focus blame. So what brought the economy to its current interminably stagnant impasse, according to this story, was the bad behaviour and selfish decision-making of individuals: bankers lied and cheated; the authorities were too weak to resist; and the gullible, Visa-wielding masses were all too happy to go along with it all. And this story has largely prevailed. The economic crisis has effectively been painted as a crisis of morals, a product of the immoral behaviour, principally, of those in the financial sector.
Given the strength of this narrative among politicians and pundits alike, it is no surprise that the political answers to these economically straitened times are framed in equally moralising terms. Impersonal economic forces are not the problem here; it’s wealthy personages wot dunnit. And this is where tax avoidance comes in. So moralised has the economic crisis become, that politicians can only envisage solutions in moral terms – that is, in terms of individuals ‘doing the right thing’, cutting back, paying their fair share, indeed paying as much tax as is legally possible. Tax avoidance has become the big issue not simply because of the economic crisis, but because the response to the economic crisis has been so myopically moralistic.
The problem is that this massive displacement activity, this eagerness to recast economic problems, from a failure to cut the deficit to the continued inability to restore conditions of growth, as a moral issue, an erring on the part of selfish individuals who just aren’t giving enough back, leaves the real problems untouched. If those currently banging on about the tax affairs of the rich really did care about raising tax revenues, they would concentrate on raising the volume of wealth that can be taxed. But that would require a tough look at the economy, at the dearth of productivity, and at how it might be possible to restore conditions of growth. It would require serious investment, risk-taking, and nerve. These are not qualities today’s political class have in abundance. So, instead, they continue to project blame, singling out individuals for moral censure in the hope they’ll increase their payments to the state.
This obsession with tax avoidance is not the mark of a morally enlightened society. It is the mark of a society that is refusing to face up to the real problems in its midst. There is no moral clarity to be gained from gawping at individuals’ tax returns, only moral scapegoating.
Tim Black is deputy editor at spiked.