The immorality of ISAs

If the current debate on tax avoidance has cleared up one thing it is this: ISAs are not tax avoidance.

I don’t think it was ever otherwise but… are they moral?

The accusation levelled time and again at businesses “not doing anything illegal” is not that they are using the letter of the law to achieve a benefit not intended by the law, ie tax avoidance, but that they are immoral.

So, how do we actually know that the behaviour is immoral? Well, you will be told that taxes pay for essential services and reducing tax revenues limits this. Usually, the proponent of this argument then reads out a list of all the services that the state provides.

This is essentially a consequentialist argument, you look at the outcome of an action to evaluate its moral worth.

No mention of the intention of Parliament you notice. It’s just: less tax = less funds for the state = immoral. Tax becomes an end in itself, rather than just the means to an end. And the rule of law becomes a side issue.

But, by this logic tax avoidance isn’t immoral per se. It’s just more immoral than your ISA.

This is then weighed against the moral benefit of who is receiving the benefit. Do people who can afford to save money into their ISA ultimately deserve the money more than the state?

This argument sounds petty, sure. But you can substitute any other intended tax relief or planning point. The morality of a tax relief depends on who claims it.

So when Bill Dodwell described a statutory demerger to Margaret Hodge the only difference to him describing an ISA is the amount of tax at stake.

Parliament clearly intended that there should be no immediate tax consequence where a transaction could meet the statutory standards, anti-avoidance rules and all. Parliament intended it as much as they did a saver who could meet the statutory standards to receive their interest tax-free.

The distinction made between the two isn’t a moral or even a legal one. It is an emotional one in relation to the perceived quantum of the outcome.

That’s why I think you need to involve the rule of law and social contract to refer to morality. Without it, the morality debate is simply people playing out their political prejudices with regards to the role of the state.

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, Rule of law, Talking Tax. Bookmark the permalink.

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