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The public don’t seem to think that giving money to HMRC is inherently moral

    Yesterday the debate about tax avoidance took a new turn as Starbucks buckled to the anti-avoidance campaigners, in effect deciding they would start paying more tax than was legally due (presumably because of the risk of lower sales due to brand tarnishing). Why this ‘tax system by witch hunt’ should worry us has been covered well by other commentators here and here. In reality, the current loss of faith with the tax system is down to the law, which grandstanding politicians have full control over. Attempts to merely shame companies presents a real risk of lowering direct investment into the UK, and the corporate tax system is increasingly complicated by intellectual property considerations, which means the oversimplified argument that ‘all should pay the same rate’ simply doesn’t wash.

    Aside from all that, one argument that kept coming up again and again was that this was a ‘moral issue’. On Newsnight, Giles Fraser claimed that paying tax was for the ‘common good’, and as such was a thoroughly moral thing to do. What Giles is in effect saying is that the state has precedence on rectitude – the things government does with our money is in all of our interests, whereas the company keeping money and passing through in dividends, or higher wages to employees, is second best.

    Given taxation is used to fund government spending, is Giles really suggesting everything government does with our money is inherently moral? I’m pretty sure if I said something like ‘Iraq’, Giles and many other tax ”fairness” campaigners would recoil in horror.  In fact, there are plenty of ways in which individuals and companies might produce significant innovations to their products or charitable donations which would improve the lot of people in this country, complete aside from any interaction with government.  Likewise, there are plenty of things government does which actually detracts from the lives of its citizens.

    That this leap of faith is made can also be seen by how campaigners simply dismiss what I, or others, often suggest: that we would support tax reform which lowers exemptions, deductions and loopholes but which would use any extra revenues to lower headline rates of tax, making the overall effects revenue neutral but fairer for all in terms of equalising the rates faced. This dismissal should tell us that many of the campaigners aren’t really interested in a fair tax system, in the sense that everyone pays the same rate, but instead interpret fairness to mean higher tax, and by implication higher government spending.

    But let’s suppose for a second that Giles is right, and tax is recognised as being for the moral good. If this idea had mass buy-in from the public we would surely expect to see large voluntary tax donations to the state (as campaigners are demanding of Starbucks) in the public accounts, right? People would be queuing up to give extra money to such a good cause? Well, helpfully, Labour MP Gavin Shuker recently tabled a Parliamentary Question to the Chancellor of the Exchequer (which was answered yesterday) asking just that: how much was given to the state from the estates of deceased persons in 2010-11, and what the total value of payments made to the Government on a voluntary basis was in the same year.

    The grand total? £1,083,537.55 - of which just £54,634.36 came from voluntary donations. That’s right, just 0.00016% of government spending for 2010/11.

    So either the public don’t really see donating to government as a big moral cause, or else they think they are largely being collectively moral enough already.

    Ryan joined the Centre for Policy Studies in January 2011, having previously worked for a year at the economic consultancy firm Frontier Economics.

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    Comments

    Anonymous - About 2478 days ago

    The morality being publicly discussed is not whether it is more moral to pay tax than not. It is not a discussion about the morality of government to do better with our money than ourselves. Rather, it is one of RELATIVE morality - of the morality of allowing some to escape tax while others can't.

    Citizens of the UK must pay tax and would be prosecuted if we didn't - we don't get the opportunity to use the corporate avoidance measures employed by the likes of Starbucks which allow them to claim they make no profit in the UK.

    Also, UK companies who do pay tax are at a competitive disadvantage to multi-nationals that don't. I'm surprised that a free-market think tank like yours is happy with this.

    The 'morality' of paying tax must be discussed in these relative terms else the discussion becomes worthless.

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    Tom Burkard - About 2477 days ago

    Anonymous misses the point. Has he actually read a word that Ryan wrote?

    Amazon gives me good service and good value. Which is far more than can be said for any public service. If Amazon avoids tax, it passes on benefits to its customer in terms of lower prices and better service. Whereas the NHS treats us with utter contempt gives us extremely poor value for money.

    If Anon wants a level playing field for UK Companies, he should blame the government. They make the playing field, after all.

    load of nonsense - About 2474 days ago

    Yes, I read the article. It was about the morality of paying tax. My point was that the article framed the debate in the wrong manner. We could discuss the differences between an open free market and centralised gov public services, but that would probably be best reserved for a different blog post.