Tax avoidance has been described as "morally repugnant' by the British government, but the problem is a symptom of a complex and bloated tax system that needs reform – says think-tank
The British government's approach to tackling tax avoidance is fundamentally flawed. There is a basic inability to recognise the problem, which is not tax advisers, but the tax system itself. Moreover, the decision of politicians to bring morality into the debate is both unnecessary and illogical.
There is something decidedly ominous about the assumption that the state has a monopoly on moral integrity. A status quo in which an individual's choice in spending money is unequivocally less moral in comparison to how the state could utilise it hardly seems fair. If anything, it seems socialist. Do we think that all the ways in which the government spends our money are for social good?
We would argue not. Morality is a subjective issue and it is a dangerous precedent for the state to be deemed a moral arbiter, especially given that the government uses taxpayers' money to lobby itself for causes which many would not deem proper. As recently uncovered by an Institute for Economic Affairs report, Sock Puppets: How the government lobbies itself and why
, by funding the lobbying of itself the government is subverting democracy and debasing the concept of charity. It is also an unnecessary and wasteful use of taxpayers' money.
Everyone is a tax avoider. It does not seem unreasonable to plan your finances carefully so not to pay more tax than you have to when it is within the law. People avoid tax all the time, and there are several tax-efficient savings plans such as premium bonds, Individual Savings Accounts and pensions. On a simpler level, consider duty-free products bought abroad or 'buy one get one free' purchases.
Income and earnings are not a collective entity. They are an individual's not the state's and thus any legal means by which a person may change their activity to pay less tax are justifiable. If the government is unhappy about this it should change legislation. It seems that the government is concerned about cases where the taxpayer avoids tax in a manner in which parliament had not intended when passing tax reform laws. That is hardly a reasonable or coherent stance.
The government needs to look at the roots behind tax avoidance rather than focus on the morality of the issue. Naming and shaming will have little tangible effect; taxpayers are entitled to knowingly prevent the depletion of their income in a legal manner. There is no reason why people should volunteer to incur higher levels of tax than is legally required by law especially given the complex set of tax rules they have to grapple with.
Tax avoidance is a symptom of our complex and bloated tax system – our tax code exceeds 17,000 pages – and rates that are set far too high. The government must seek to reduce and simplify taxes; bringing morality into the equation is utterly misguided. The government has missed the central issue. Perhaps if our tax system was clearer, people would not try to avoid tax in the first place.Stephanie Lis is communications officer at the Institute of Economic Affairs think-tank in London