If there’s any element of morality worth discussing with respect to tax avoidance, I think it needs to be done under the heading of ‘rule of law’.
It’s something that was raised by Nigel Mills MP at this week’s House of Commons debate. It’s also something that David Goldberg QC argued was being undermined by the Public Accounts Committee. Both are very worthwhile contributions and actually speak more about morality than the superficial moralising that the media indulges itself in.
Law is not a substitute for morality or even natural justice. The law aims to be moral. It aims to implement natural justice. But it does not presume to substitute itself for those because it is an artificial construction.
It is, however, considered a moral necessity to observe and respect the rule of law. Most moral theories arguably support this contention, but I personally follow a Kantian categorical imperative. Basically, could I will it that everyone disregard laws in accordance with their own moral choices? No. Moral agents must therefore observe the rule of law.
It’s important to note that the rule of law isn’t just obeying whatever laws are in existence, regardless of the relationship between individual and state. The rule of law means something quite distinct from the requirement to obey the law.
The purpose of the rule of law is effectively to remove arbitrary governance and the risk of oligarchy or ochlocracy, being the arbitrary rule of the few or the many respectively. The law is there to provide an objective, principle-based guide to what is considered just by society. The rule of law applies equally to all and no individual should be above it.
To my mind, this touches on the fringes of what is known as the ‘social contact’.
The social contact is a term used to describe the submission of individuals to the state. There are various formats of it, originating in Ancient Greece. Glaucon, Plato’s brother, describes a social contract in Republic. A certain tax enthusiast might care to note that Glaucon was an actual sophist…
The social contract tends to fall under two categories: one where ‘the people’ contract with ‘the state’, and one where all individuals contract with each other.
The former appears to me to be more authoritarian in nature, an example being Hobbes saying that future generations will be bound by the existing contract.
An alternative is put forward by Rousseau author of The Social Contract. Rousseau preferred the second formulation but went a bit further and said that the the social contract was the mechanism by which ‘the state’ was brought into existence. He distinguished this from ‘the sovereign’ which is the collective of individuals entering the social contract.
Rousseau advocated that the social contract was freely entered. I believe this to be an essential part of the social contract for it to be valid. However, I do believe that we can accept the social contract passively by accepting the status quo.
So how does this relate to the rule of law? Well, this is the basis of the existence of the state and the legislator appointed to codify and safeguard the law. I think that the distinction between the state and the sovereign here is of extreme importance.
Although the law is codified by the legislator, its ultimate authority derives from the sovereign, ie the democracy that endorses the legislator. The sovereign dictates the general principles of the law and the legislator basically tries to implement these in detail.
This is one of the reasons I think an independent judiciary is so integral to our justice system. The law exists independently of the legislator and must not be open to their retrospective interpretation. There are basic principles of law which cannot be compromised.
Also, it is worth considering that the failure of law is not the same thing as the failure of the rule of law. The failure of law is the failure of the legislator. And in some respects, the failure of the legislator is the failure of the sovereign to impose itself on the legislator.
Most of the moral arguments I have read against “tax avoidance” fail to acknowledge the concept of the rule of law or ignore it deliberately so as to excuse arguments that undermine it. I am thinking in particular of the discussions regarding multinationals where most of the popular stories are clearly within the intention of the law.
Yes, there are cases of actual tax avoidance around, cases which are deliberate attempts to subvert the intention of law. But these are distinct from the cases where the law is implemented as intended, despite it being to the detriment of tax revenues in the UK.
In this latter situation, such as Starbucks for example, I don’t believe it is right that the individuals can be called immoral. They appear to have observed the intention of the law in good faith.
There is no moral imperative to pay more tax than legally due. The moral imperative in paying tax at all derives from observing the rule of law and nothing else. If the rule of law is observed faithfully, there is no moral argument for paying more.
There is nothing inherently good or bad about tax in itself. It is not moral in character. It is an action wholly defined by its context. And its context is the rule of law.