Tax avoidance, complexity and nihilism

I find the debate on tax avoidance quite interesting. Not so much for the substance of the debate, but the manner in which people debate it.

I think there’s quite a disconnect when you see people who are livid about some of the recent stories, and those who are  ambivalent.

I use the expression “recent stories” rather than “tax avoidance”, because I don’t think many of the stories mentioned in the press are actually cases of tax avoidance. I think that they are not only within the law, but within the spirit of the law.

The real discussion should be about whether the law, it’s letter or spirit or whatever, is fair, not whether company’s actions are moral.

I should point out that I don’t view stories such as Starbucks as desirable outcomes with respect to corporation tax, but acceptable ones. The statement by John Whiting, that corporation tax paid in the UK is a bonus, is actually a fair reflection, I think.

I know it’s an unpopular point of view, but when you consider the tax system as a whole, a company like Starbucks is raising significant amounts of VAT, paying employers NICs and paying salaries that yield PAYE.

The fact that VAT is technically a tax on the consumer, is a fairly petty point. Especially from those who argue that you should consider the underlying economics of the transaction. It is a cost of sale in all but accounting treatment. How many consumers look at the VAT element as separate from the cost?

Or looking at it from Starbucks perspective, VAT pushes up their pricing and they will inevitably reduce the profit margin. The higher the price, the more likely that people will decline to buy, opting for a cheaper option or simply to do without.

This is a little bit besides the point I wanted to make, but it is a bit of an illustration of it.

The tax system makes discussing tax in a sensible manner, let alone the morality of it, a very difficult task. Really, there’s been no debate on morality or tax. There’s been a naming and shaming campaign for the purposes of selling newspapers.

I don’t believe there’s much political capital either way in the debate, though it’s not for the want of trying. But it is very easy to get bogged down in the details of specific cases. Unfortunately, in terms of argument (not debate) when everybody is on your side it is easy to dismiss the other person without a meaningful argument.

I have seen numerous examples of the technique known as the “that old chestnut” dodge. This ignores the underlying disparity in the law, and means that the one thing that people could do to address it (arguing for a change in the law) is the least likely thing to happen. It simply further ignorance.

I think that a lot of people bandy around words like immoral and morally repugnant, but don’t really back it up with anything. I don’t mean anything dismissive by that, I think that people tend to make moral decisions with their gut and decide how to justify it after the fact.

People value their moral decisions and are loathe to find them compromised. I think this is why you tend to find people stay retrenched with certain lines of argument and refuse to discuss opposing arguments at length.

Because of this, most people try to seek a coup de grace line of argument.

Take for example the position that was put to me a while back in connection with a company which appeared to be within the spirit of the law, but still acting “immorally”. The argument that was made as an opening was that apartheid was legal, therefore legality does not equal morality.

Whilst this could seem a straightforward deduction, it actually has horrifically nihilistic overtones to me. That’s because the inductive element, that our laws and the laws of apartheid era South Africa are comparable in their legitimacy or value, is difficult to substantiate without accepting that no laws have any moral value.

This argument seems fundamentally contrary to anybody who says they believe in the rule of law.

Believing that it is moral to observe the rule of law is not the same thing as saying that legality is morality, so why would anybody use an argument against the former to disprove the latter (which I cannot think of anybody who has ever argued)?

It is things like this that frustrate me the most, partly because I know I used to say things like that when I was in the midst of depression and at my most nihilistic. In that respect I’m projecting my own issues slightly, but I also understand the consequences of making such arguments.

Ethics is easy when you simply argue about what is wrong. The real difficulty comes with arguing what is right. It tends to help if you haven’t undermined the foundations of your own argument in trying to destroy somebody elses’.

That’s what I want to get around to, talking about what is right in the realm of tax legislation, not just what is wrong with tax avoidance.

But I’ll draw a line under this blog for now and call it a rant.

About Ben Saunders

I'm a Chartered Tax Adviser and a freelance writer. This is my personal blog about, well, mainly taxation. I might put other stuff in. Who knows.
This entry was posted in Ranting, Talking Tax, Trains of thought from a train. Bookmark the permalink.

2 Responses to Tax avoidance, complexity and nihilism

  1. I find that ‘well apartheid was legal’ argument to be particularly inappropriate in this arena. Apartheid wasn’t ‘legal’, in the sense of it being something that was ‘not illegal’, it was *law*. The law pronounced that all people were not equal, and the consequences that followed.

    Tax avoidance is not (by definition) something prescribed by law. It is the art of finding the most advantageous course which has not been blocked by law. Make a moral case, by all means, but apartheid isn’t only a poor comparison because of the obvious… it’s, technically, kinda like the opposite thing. ‘Apartheid avoidance’, I feel sure, would have been regarded as a just and noble thing to do in the face of a bad law.

    One might, therefore, argue that it’s the Libetarian ‘all tax is theft’ wing of the current debate who are best placed to cite the injustice of apartheid in support of their contentions?

    • Thanks for the comment.

      I completely agree. It is a completely inappropriate argument and I can’t fathom why anyone would use it to distinguish between what is legal and what is moral. If you do make that connection, which I think is a nihilistic argument, then I can see how it would support a fairly extreme libertarian point of view.

      The person who put this to me is definitely not a libertarian. It was a little while ago, but I have to say I’ve mulled over his use of it because I did find it pretty shocking.

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